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Legal Update

Joy to the Classical World – music industry pierces the corporate veil

30 October 2012
Mayer Brown Legal Update

Earlier this month, judgment in Naxos Rights International Ltd v Project Management (Borders) Ltd and Salmon [2012] CSOH 158 was handed down by the Scottish courts. The case involved Naxos, the largest independent classical music record label in the world, making an infringement of copyright claim against a web-based trader of classical music, Project Management, and its sole director, Dr. Salmon. It is well established that in intellectual property cases someone can be jointly liable for an infringement if he has acted in concert with other infringer(s) for a common purpose. That said, directors of a company are not usually found to be jointly liable with their company. Here the court ruled that Project Management and Dr. Salmon were jointly liable for breach of copyright.

  • Background: Project Management traded classical music through its website Naxos pursued Project Management, who operated the site, and Dr. Salmon, its sole director and shareholder, for unpaid royalties stemming from sale and resale of two of its copyrighted recordings.

  • Infringement by the company: It quickly transpired from the expert evidence of both parties that two recordings in question, Vivaldi’s “The Four Seasons” and a Christmas carol “Joy to the World” (totalling 14 tracks), were indeed copies of Naxos’ recordings. Project Management was found liable. The question then turned to Dr. Salmon’s own liability.

  • Director’s liability: Joint liability arises where a party “intends and procures and shares a common design that the infringement takes place”. Applying this principle, the court ruled that Dr. Salmon was liable in his own right. The court reasoned that, together with Project Management, Dr. Salmon had put together and operated the website through which the infringing tracks were sold.

  • Implication of the decision: The decision follows an established principle in the intellectual property arena and applied it to online traders. This is a welcome news for copyright owners as it gives some clarity as to the threshold required for them to pursue individuals hiding behind the corporate veil of infringing web-based companies.

In a separate development earlier in the year, Anton Vickerman, the operator of Surfthechannel website, was sentenced to four years in prison after a private criminal prosecution brought about by Federation Against Copyright Theft (“FACT”). Surthechannel at its peak was the 514th most popular site on the Internet and generated £50,000 to £60,000 a month in advertising revenues alone, causing millions of pounds worth of damages to the owners of copyright in the films and TV programmes illicitly found on the site.

Taken together, these decisions suggest that individuals running websites containing infringing materials are increasingly being held liable, both in the civil and criminal courts, for their role in copyright infringement.

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