Before :

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Mr Richard Spearman QC and Mr Pushpinder Saini (instructed by Wiggin & Co) for the Claimants

Mr Richard Arnold QC (instructed by Denton Wilde Sapte) for the Defendant

Hearing dates: Wednesday 15 January 2003

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I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

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Mr Justice Peter Smith

Mr Justice Peter Smith:

1. This is an application by the Claimants (the First, Third and Fifth Claimants suing on behalf of themselves and other members of the British Phonographic Industry Limited ("BPI")) for summary judgment for a declaration that the CD Burning Service as set out in the Particulars of Claim, is unlawful if provided in circumstances where the owner of the copyright in the relevant sound recording has not licensed the Defendant to make a CD-R copy of its work. In addition the usual inquiries are sought as to damages both in their own right and in a representative capacity (including additional damages) and/or an account of profits in respect of the Defendant’s acts of infringement.
2. The Part 24 Application was issued on 4 October 2002, the Claim Form with the Particulars of Claim having been issued on the 2 July 2002.
3. The Defendant is a company, which owns and operates Internet Cafés at eight sites within the United Kingdom as identified in paragraph 6 of the Particulars of Claim.
4. The claim is in respect of five sound recordings identified in paragraph 10.3 of the Particulars of Claim.
5. There is no dispute as to the title to sue in respect of these five works.

THE DEFENDANTS OPERATION

6. There is no dispute as to the operation of the Defendant’s Internet cafés in relation to its CD burning service. Upon payment of a fee, a customer is provided with access to the Internet via a PC. Those PCs are connected into a central server, and there are no copying or other facilities that can be utilised by the customer at the screen. Upon payment of the fee the customer is given a user ID. Files downloaded by a customer can be stored by the customer on a private directory on the Café’s server identified by reference to the personal ID.
7. After the termination of a session a customer can ask the staff to download on to a CD-R the material in his private file area. That area can include sound recordings downloaded from the Internet. If the option is taken up, the customer presents his user ID to the staff member, who has access to the relevant customer’s allocated area, and downloads the relevant files on to the CD-R using the CD writer programme. A fee of £5.00 (Five Pounds) is paid for this being £2.50 (Two Pounds Fifty Pence) for the CD-R and £2.50 (Two Pounds Fifty Pence) for the service.
8. The Defendant’s evidence (which I accept for the purpose of this application) is that the members of staff are prohibited from looking at the contents of any files, unless the customer agrees. It is quite clear also that in the logon process a significant number of warnings are given to customers in respect of copyright infringement.
9. The Claimants contend that the downloading of sound recordings from the Internet without the consent of the owners of the copyright infringes the copyright in the sound recordings contrary to section 17(1) and 18(1) of the Copyright Designs and Patents Act 1988 ("CDPA 1988").
10. The Defendant does not dispute that if there has been a downloading by a customer in that way and a copying that the customer would infringe any relevant copyright in the sound recordings, subject to a statutory Defence under section 70 CDPA 1988 to which I shall refer later in this Judgment. What the Defendant denies is that it infringes the copyright by virtue of that process.
11. The Claimants’ case is based entirely on the premise that the relevant recordings were downloaded from the Internet and then burnt on to the CD-R.
12. In the light of evidence introduced in the case by the Defendant there is a suggestion that the recordings could have been created from a CD provided by the customer for copying. It is clear that the Defendant’s process enables copying by burning on to a CD both as regards downloaded material and material uploaded from (for example) another CD or a floppy disk. I do not see that there is any evidence to suggest that a floppy disk has been used in this case because I take notice of the fact that the memory size of the floppy disk would not be sufficiently large to accommodate the recordings.
13. The Claimant’s contentions are based solely in the Particulars of Claim on downloading from the Internet. In his skeleton argument on behalf of the Claimants, Mr Spearman QC, who appears with Mr Saini, and in his oral submissions submitted that even if there was an uploading from material provided by a customer, the inference to be drawn was that the uploaded material nevertheless resulted in the production of an infringing copy CD. Mr Arnold QC who appears for the Defendant objected to the case being put that way without an application to amend.
14. Mr Spearman QC applied to amend and I indicated that I would give him permission to amend but that would be on terms that the Defendant would have an adjournment because Mr Arnold QC said he was unable to deal with that at this stage (quite properly), and therefore it would be at the Claimants’ expense. In the event Mr Spearman QC decided that that was an offer which was not worth taking up, and he did not proceed with his application to amend. So the Claimants’ case can only succeed if it establishes that the songs in question were downloaded from the Internet and burned on to the CD that way.

DOWNLOADING OR UPLOADING

15. The Claimants served a detailed report by a Mr Sanderson. That report indicates that in his opinion the material was downloaded from the Internet. It is fair to say that the upload issue was not present at the time of his report and I do not think that it can be said on behalf of the Claimants that that report has any weight as regards downloading as opposed to uploading.
16. The issue of downloading or uploading was referred to somewhat obliquely in the Defence. In paragraph 5(3) it is said:-

"The Defendant is unable to admit or deny that the sound recordings were downloaded from the internet as opposed to being uploaded by customers from their own CD ROMs or floppy disks and requires the Claimants to prove the same."

17. It is impossible at this stage for any further evidence to be adduced as to whether the material was downloaded or uploaded. The Defendant does not adduce any evidence nor can it; it does not even know the identity of the customer.

18. The only evidence adduced by the Defendant is extremely sparse. In paragraph 10 of Mr Bett’s witness statement, he says it is possible to upload files, that in theory it should take the same amount of time to upload as to download, and it is therefore technically possible.

19. A Mr Henderson, an employee of Hewlett-Packard Limited, a technical architect, also admits to that as a theoretical possibility.

20. It would have been open to the Defendants to adduce some evidence as to the percentage of customers who provided them with material to upload as opposed to material to download. They have chosen not to adduce any such evidence. The only evidence is that in paragraph 13 of the witness statement of Mr Da Silva where he says:-

I read that paragraph as showing that uploading only occurred once in his experience and that it took an inordinately long time.

21. Mr Spearman QC submits that, on the balance of probabilities, I can determine that the material was downloaded and not uploaded. First, he says that what the operations of the Defendant here are orientated to, is being an Internet Café. I do not find any great assistance from that. Second, he submits that there was no copying facility at the terminals. That is right but that does not advance the matter further as the copy facility is done by the operator at the desk. Nevertheless, Mr da Silva’s evidence is that the desk is very busy and if this uploading operation would take as long as he suggests it is unlikely to my mind that it would occur. Third, Mr Spearman QC submits there would be no possibility of uploading from floppy disk. I agree with that, but that does not exclude the possibility of uploading form a CD. Finally, he says that there is no evidence to show that anybody did it, it is merely described as a technical possibility.

22. There has been no evidence produced to show that there is an authorised compilation of the five recordings in question. If the compilation was already on an infringing copy, there is no sense to my mind in a customer going to the expense of having a copy produced for £5.00 (Five Pounds) (or £2.50 (Two Pounds Fifty Pence)) at the Defendant’s premises when he clearly has access to copied material which would only cost him the cost of the CD ROM which is about £0.25 (Twenty-five Pence).

23. If there was any credible evidence, the Defendant would have had ample opportunity to produce it. This uploading issue from their point of view has been raised for many months. It seems to me that all the Defendant does is raise a possibility. That to my mind is not enough. I have no evidence against an obvious conclusion that the material was downloaded from the Internet.

24. On the balance of probabilities I so determine. I do not see that there is any more material which will be available at trial to justify going to trial on that issue.

25. I therefore conclude that material was downloaded in the manner claimed by the Claimant and that prima facie it was downloaded in an unauthorised way.

26. All of the matters raised by the Defendant to my mind are nothing more than speculation and their evidence is no more than possibilities. It falls plainly within the observations of Megarry VC in Lady Anne Tennant -v- Associated Newspapers [1979] FSR 298 at page 303 where he said in a well known passage:-

There is simply no evidence to sustain any of the Defendant’s contentions. I am aware that this is a Part 24 Application and I am aware of the principles summarised in Swain –v- Hillman [2001] 1 All ER 91 at 92 and Three River DC –v- Bank of England (No.3) [2001] All ER 513 at paragraph [95]. However, a matter has to have some substance to it. Merely because a Defendant raises it, it does not mean that the matter that is raised is sufficiently significant so as to show that the defence is more than fanciful. The same of course happens in the case of witness statements. A Court is not bound absolutely to accept a witness statement on behalf of a defendant. It can reject it if the evidence is sufficiently unsatisfactory so that the Court can come to a clear conclusion at the Part 24 stage that no credence or reliability can be placed on it.

27. The same also deals with Mr Arnold QC’s submission that there are questions of law that mean the matter should go to a final hearing and not be disposed of at Part 24. In this context he relied upon the Court of Appeal decision of Campbell –v- Frisbee [2002] EWCA CIV 1374. I find no assistance from that decision. The Court appears merely to have said in that case for reasons that are not made clear it was not appropriate for the matter of law in relation to a duty of confidentiality and its interrelation with contractual duties to be dealt with at the Part 24 stage. I do not read the decision as indicating a general proposition that where there is a question of law the matter cannot be dealt with at the Part 24 stage. Mr Spearman QC drew to my attention the detailed arguments at the Part 24 stage dealt with in the Court of Appeal in Ashdown -v- Telegraph Group Limited [2002] CH 149. To my mind there is nothing in this. If one looks, historically, the provisions of RSC Order 14 A were introduced to deflect arguments like this under the former RSC Order 14 procedure. The practice direction under Part 24 preserves that position. I do not see why, if the Court is confident that there are no factual issues, a legal issue cannot generally be disposed of at the Part 24 stage.

28. Mr Arnold QC in his skeleton argument referred to the fact that the Defendant had made Part 36 Offers to settle. The purpose of this referral was to reinforce his submission (which I shall deal with below) that there should not be a split trial between liability and quantum in this case. It seems to me that on the hearing of a Part 24 Application, a Judge should not be told of the existence of Part 36 Offers.

29. If one looks at CPR 36.19 it is provided under sub-rule (2) that the fact that a Part 36 payment has been made shall not be communicated to the trial Judge until all questions of liability and the amount to be awarded have been decided. Although this principle has been dis-applied in relation to interlocutory applications, I do not regard a Part 24 Application as being an interlocutory application for those purposes. The practice under Order 14 was that a payment in should not be referred to. There is a similar provision as regards interim payments in CPR 25.9.

30. It seems to me that at a Part 24 Application one is in effect dealing with the trial (unless the opposition is successful). It would be invidious to my mind if parties could refer to Part 36 payments. Although in this case the fact of a payment is something which the Defendant is anxious to refer to I can foresee many cases where a Defendant who has made a Part 36 offer or payment for commercial reasons would nevertheless wish to preserve its position as to costs and fight matters at the Part 24 stage. If a Defendant could refer to the Part 36 payment, equally a Claimant could. It seems to me that cannot be right. I now go on to consider the substantive Defences raised by the Defendant.

31. In this context Mr Arnold QC submits that the Defendant is in the position comparable with the situation where for example "A" sends an infringing copy of a literary or artistic work to "B" by fax or email; the copy is made by "B’s" machine but the person who caused it to be made was "A". Accordingly, he submits the person who did the restricted act and infringed copyright was "A" not "B"; "B" merely facilitated the infringement by providing the means by which the copy was made. He draws a similar analogy with an Internet Service Provider whose computer stores an infringing copy being transmitted from "A" to "B" and who is not responsible for that act of copying (but may become a secondary infringer if put on notice that the file is an infringing copy). He refers to Laddie, Prescott & Victoria "The Modern Law Of Copyright And Designs" third edition paragraphs 4.13 – 4.14.

32. In addition he anticipates that the Claimant will argue that the situation is different in this case because of the intervention of a human operator of the machine in the shape of the Defendant’s employee. He submits that this makes no difference because the human being is an automaton. He draws an analogy where "A" asks a blind person "B" to photocopy a piece of paper, which contains a copyright work. The blind person he submits has no knowledge of what is being copied and acts as an automaton carrying out "A’s" instructions.

33. There are to my mind two major fallacies to these submissions. First the liability for infringement under sections 17 and 18 is strict. It is no defence for a person copying an item to assert that he did not know he was infringing a copyright. The reasons for that are self evident. Obviously when strict liability is pushed to its boundaries absurd results can arise. It would be absurd if the recipient of a fax over which he has no control could be said to be infringing it merely because his machine is the one that prints the transmission. Generally, the owner of a fax machine cannot stop material being sent. He is an involuntary copier. The same occurs in relation to the Internet Service Provider.

34. In the present case the only material which is available for this defence is the fact that the Defendant chooses to keep the files of an individual customer confidential allegedly by directing that the employees cannot see them unless the customer consents.

35. This is not involuntary; it is voluntary. The difficulty only arises because of the terms upon which the Defendant chooses to allow customers to copy information. Further the Defendant is doing this for a profit. I do not see it is any different to a high street printer that is asked to copy material. If the high street printer copies material, which contains infringing copyright material (for example a pirated PhD Thesis) the printer will be liable. He will not know that the material is infringing for obvious reasons. Nevertheless, he is liable. I do not see how it can be said to be different because he chooses not to know. This to my mind is to introduce a mens rea defence when none is available.

36. Secondly, I do not see that the blind operator will necessarily have the defence. If a blind person is asked to copy something without taking precautions to check whether or not the matter potentially infringes copyright I do not see how that avoids strict liability infringement. If the blind man has a defence one can stretch the matter even further. What about the person who is illiterate? What about the person who cannot read the language of the documents being copied? What about the person who does not actually look at the time that the documents are being copied? In none of these cases would there be a defence to my mind. Nor could it be said in any of those cases that the person is being an automaton.

37. Accordingly, this matter does not afford the Defendant a defence.

38. This section provides as follows:-

39. There are two separate issues arising under this section. First, there is the question of whether or not the copying alleged to be the infringement is for "private and domestic use". If it is not then the section provides no defence. The second issue arises if that threshold is passed as to whether or not matter to be found on the Internet is a "cable programme" or "any work included in it".

40. Dealing with the first basis it seems to me that it is impossible for the Defendant to make out a defence in this case. First, as a matter of fact no evidence has been adduced to show these items were copied for the purpose of private or domestic use. The burden of establishing that must be on the Defendant as it wishes to rely upon an exception from a prima facie infringement. The best Mr Arnold QC could say was that I should take notice in some way that an overwhelming number of the Defendant’s customers were likely to use it for that purpose and were not commercial entities. That to my mind is not good enough. The Defendant has an extensive business operation and could adduce evidence if it chose to do so. It has not chosen to do so.

41. In any event, the interposition of the Defendant in the copying exercise for commercial gain is fatal to this defence. The copying is done by the Defendant and the Defendant is not copying it for the purpose of private and domestic use. It is copying for the purposes of selling the complete CDR for £5.00 (Five Pounds). It is making a profit out of it. It does not seem to me to be relevant that the person for whom it is copied is going to use it for private and domestic use. If one pursued that to logical conclusions (as Mr Arnold QC freely acknowledged) that would mean that any material on the Internet could be downloaded by a commercial organisation and that organisation could sell that downloaded material to a customer, provided the customer asserted that it was for his own private and domestic use. That, to my mind, is not the mischief intended to be covered by the section. The section is meant to cover an individual who makes a copy and uses that solely for his private and domestic use. I accept the observations in Laddie paragraph 20.89 that that means that private individuals can build up a substantial private library. That may be so: the bounds of the law of copyright protection have had imposed on them some statutory limits. Obviously, the draftsman of the Act wished to ensure that excessive copyright claims were not made against people who copied matters that were broadcast or delivered by cable solely for the purpose of their private or domestic use. This is presumably a balancing exercise between the protection of the rights to the material and the general social benefits afforded the public by the rise of first video copying machines and later CDR copying machines. Mr Arnold QC’s submission as to section 70 would lead to quite extraordinary results and I do not accept that that was what was intended.

42. He gave an example of somebody who is asked to copy a recording on his own VCR for the purpose of a neighbour. I do not see that is the same even if the neighbour is reimbursed for (say) the costs of presumably putting the blank video tape in his machine. It bears no relation to the Defendant’s commercial operation of making money by copying CDR’s. This is not a service being provided for people for use for private and domestic use; it is a business operation carried on by the Defendant for profit. Significantly, the Defendant discontinued this service because it was not profitable. That, to my mind, finally destroys any credibility in relation to this argument.

43. It is therefore unnecessary for me to decide whether or not the Internet is a cable programme for the purposes of section 70. There is authority in the case of The Shetland Times Ltd –v- Wills and Anor. [1997] EMLR 277 where, on interlocutory application, Lord Hamilton in the Court of Session Outer House held that the service of posting news articles on a website was within section 70 CDPA 1988. This decision has been criticised see "Laws of the Internet" (Clive Gringras) (Butterworths) page 170.

44. This involves examining a definition of cable programme services, which is defined in section 7. Section 7(1) defines cable programme service as being a service "which consists wholly or mainly in sending visual images, sounds or other information by means of a telecommunications system, otherwise than by wireless, telegraphy for reception:-

45. Under sub-section (2) the following exception is set out:-

46. The point of that provision is to exclude an interactive service. In the Shetlands Times case, the Judge rejected the argument that the services were interactive merely because comments and suggestions could be made.

47. Although it is not necessary for me to decide it, it seems to me that the decision in Shetland Times was correct and I am comforted by the fact that that is supported by Laddie which I prefer to the criticisms of Gringras. I agree with Laddie’s observations in paragraph 8.18 that a restricted meaning would be likely to lead to arbitrary results in relation to new technology, in which the sending and receiving of information is increasingly blurred.

48. Therefore if this question had arisen I would have concluded that the transmission of the material via the Internet would be a cable programme service within section 70. However, for the reasons that I have set out above this does not arise.

49. Mr Arnold QC submits that the matter should go off to trial in any event. His primary submission in this regard is the fact that the five infringing matters are samples only. There will need to be, if liability is established, a wide-ranging examination (if that is actually possible) of all other attempts to copy material from the Internet in an infringing way. In each of those cases, various defences can be raised which are not available now. For example, he raised but did not pursue at this stage a defence under section 30 CDPA 1988. That may be so, but that is the nature of the beast when one deals with infringements which are not identical. It is no different to my mind to any other case where a Claimant obtains interlocutory judgment for damages to be assessed and the Claimant has various differing heads of damage. Each requires different treatment. In some cases a Defence might be afforded which would not otherwise be available to a different head of damage. I do not see how this has any relevance in relation to clear established issues as to liability as I have found.

50. Second, as I have said above, he prayed in aid the Part 36 Offers. For the reasons that I have set out in this Judgment the time to raise those to my mind was after Judgment on issues as to liability. The impact to my mind is as to a question of costs only. I have not heard either party on that at the moment. In some cases it is appropriate to decide the question of costs on liability only hearing at the second stage when the amount of damages is actually established. In other cases it is right that the issue as to liability is dealt with separately, so that if a Defendant defended when it should not have done so the question of costs ought to be decided at that stage in favour of the Claimant.

51. I will hear submissions on these aspects when I deliver this Judgment.

52. I am grateful for the careful and sustained submissions of both counsel in this case, which have been very illuminating.