Case No: HC07C00647
Neutral Citation Number: [2010] EWHC 1986 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROERTY
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 30 July 2010

Before:

SIR WILLIAM BLACKBURNE
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Between:

	(1) EXPERIENCE HENDRIX LLC
(A limited liability company formed under the laws of the State of Washington, United States of America)
(2) THE LAST EXPERIENCE INC
(A corporation formed under the laws of the State of California, United States of America)	Claimants	
	- and -		
	TIMES NEWSPAPERS LIMITED	Defendant	

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Philip Jones QC and Hugo Cuddigan (instructed by Eversheds LLP) for the Claimants
Geoffrey Hobbs QC and Emma Himsworth (instructed by Harbottle & Lewis LLP) for the Defendant

Hearing dates: 17, 18, 22, 23, 24, 25, 26, 29, 30 and 31 March and 19 April 2010.
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Judgment
Sir William Blackburne : 
Introduction 
1.	These proceedings arise from an unlikely combination of events: a rock concert which took place in London in February 1969; the decision by The Sunday Times newspaper to cushion the effect of a 20p rise in its price to £2 by issuing free to purchasers of the newspaper a CD (known in the industry as a “covermount”) containing recordings of songs performed at that concert; and plans by two US companies, on their way to fulfilment in September 2006 which is when the covermount appeared, to launch a film of the concert together with accompanying DVDs, CDs and general merchandise associated with that already long-past event (“the Project”).
2.	The concert in question, at the Royal Albert Hall on 24 February 1969 (“the RAH Concert”), was given by a three-man band led by the late Jimi Hendrix.   The band was known as The Jimi Hendrix Experience.  With Jimi Hendrix’s consent two US citizens, Gerald Goldstein and Steve Gold, made separate sound and film recordings of the concert.
3.	The claims in these proceedings are concerned with the band’s performance rights in the RAH Concert (“the Performances”), namely the reproduction and distribution rights in the Performances, and in the sound recordings made by Messrs Goldstein and Gold of the Performances (“the Recordings”). It has been common ground between the parties in these proceedings that the Performances amounted to a “musical performance” within  the meaning of section 180(2) of the Copyright, Designs and Patents Act 1988 (“the Act”) and that they were a “qualifying performance” within the meaning of section 181 of the Act.  It has also been common ground that the Recordings qualified for copyright protection notwithstanding that Messrs Goldstein and Gold, as their authors, were at the time (and Mr Goldstein remains) US citizens.
4.	The two claimants are US companies. Together, they assert title to the rights both in the Performances and in the Recordings. The first claimant got wind of the proposed covermount a few days before the appearance of the edition of The Sunday Times in which it was to be included.  Its UK solicitors, Eversheds LLP, wrote to the defendant, which publishes and distributes the newspaper, informing it of their client’s ownership of the performance and recording rights in songs performed by Jimi Hendrix and his band.   (At that stage Eversheds did not know precisely what the covermount would contain.) They sought an undertaking that the covermount would not be issued.  The defendant, claiming to have a valid licence to make and distribute a covermount containing the particular tracks, although without indicating to Eversheds which they were, refused to give the undertaking.  The covermount duly appeared with the 10 September 2006 edition of The Sunday Times.  In all, just over 1.56 million copies of the covermount were made, of which just over 1.37 million were included with copies of that edition sold and distributed in this country and in the Republic of Ireland.  (The covermount was not included in copies sold elsewhere.) 
5.	The covermount contained ten songs.  Two of them, Little Wing and Voodoo Child, were derived from mixes made in 1971 of the original four-track audio recording made of the RAH Concert by Messrs Goldstein and Gold.  They had first appeared, quite lawfully, as part of an album called Hendrix in the West in 1972 and, again, on the Jimi Hendrix Experience box set which appeared in 2000.  The other eight songs (Room Full of Mirrors, Fire, Purple Haze, Wild Thing, Bleeding Heart, Sunshine of Your Love, Hey Joe and Foxy Lady) came, it is thought, from the monophonic Nagra film soundtrack recorded as part of the filming of the RAH Concert by Messrs Goldstein and Gold.  The film had its own soundtrack which was quite separate from the special four-track audio recording made at the same time by Messrs Goldstein and Gold although both were made under the arrangements which they had agreed with Jimi Hendrix.
6.	Quite how the monophonic Nagra recording came to be in circulation was not known.  But it was common ground that a number of bootleg (in the sense of unauthorised) recordings (both audio and visual) of the RAH Concert were (and are) in circulation.  I will return to this later.
7.	The claimants contended that by authorising and procuring the making and free distribution of the covermount in this way, the defendant infringed their rights and caused them substantial damage       
8.	They issued these proceedings on 13 March 2007 claiming an injunction to restrain infringement of their rights in the Performances and in the Recordings, orders for delivery up and forfeiture of all infringing copies, an inquiry as to damages (including additional damages) or, at their option, an account of profits together (in either case) with an order for payment and interest.  On 26 July 2007 they applied for summary judgment. The application came before Warren J on 13 December 2007.  The only issue was whether, as the defendant claimed, the actions of which the claimants complained had been licensed. This ultimately turned on a purported licence which was said to be contained in a letter dated 27 September 1979 that had been signed by a Mr Bernard Solomon on behalf of the second claimant.  The letter was addressed to a company under Mr Solomon’s control called Everest Records Group.   But there was also a suggestion that the licence had been granted sometime before 1979.  Warren J acceded to a request by the defendant for an adjournment to enable Mr Solomon’s evidence to be obtained in order to clarify the position.  When the matter returned before him two months later, on 19 February 2008, a statement by Mr Solomon was available but it gave no support to the purported licence.  The summary judgment application therefore succeeded. The order reflecting this result is dated 11 March 2008.  It records summary findings of the claimants’ entitlement to the rights in the Performances and the Recordings and of the infringement of those rights by the issue of the covermount.  Injunctive, including delivery-up, relief was ordered and, materially to the trial before me, an order made for an inquiry as to the damage suffered by the claimants by the issue of the covermount, alternatively, at the claimants’ option, an account of the defendant’s profits by reason of the issue.  Directions were made for the service of evidence by the defendant to enable the claimants to make their election.
9.	On 16 May 2008 the claimants elected to pursue an inquiry as to damages.  This is the judgment on that inquiry.  It follows a trial which lasted 11 days.
10.	Assuming, as the claimants invite me to hold, that damages are to be assessed on the basis of the losses which the claimants can show were caused by the issue of the covermount and assuming also, as the claimants further invite me to hold, that the losses for which they seek compensation are worldwide and are not confined to those suffered in the United Kingdom, a striking feature of the claim is that each claimant contends for a quite different sum as representing the overall losses which they say they have jointly suffered.  The first claimant contends for a figure of the order of $8.94 million whereas the second claimant contends for a figure of the order of $17.4 million. These are calculated as at 10 September 2006 and do not include interest from that date.  The defendant, by contrast, contends that if, which it disputes, the claimants are to receive any compensation at all it is to be assessed by reference to the fee that the claimants could legitimately have charged in September 2006 for a notional licence to permit it to make and issue the covermount.  It says that the fee for a single event of that kind would not have exceeded £100,000 at the very most. It denies in any event that damages are to be assessed by reference to losses other than those suffered in the United Kingdom.  I do no more than summarise in the barest outline two of the main issues.
11.	I am not asked to fix the precise amount of the damages if I should find any to be payable. This is because of various imponderables in the calculations involved.  Instead, I am asked to make a series of findings which, it is hoped, will enable the forensic accounting experts on each side to agree a final calculation. 
12.	Mr Philip Jones QC and Mr Hugo Cuddigan have appeared for the claimants and Mr Geoffrey Hobbs QC and Ms Emma Himsworth have appeared for the defendant.    
Jimi Hendrix          
13.	Jimi Hendrix, who was a singer, composer and guitarist, had a short but meteoric career.   Born in Seattle on 27 November 1942, he was persuaded to come to this country in 1966 by another musician, Chas Chandler (the former bass player with the Animals), where he joined with two British artists, Mitch Mitchell on drums and Noel Redding on bass guitar to form The Jimi Hendrix Experience.  Their first single, Hey Joe, was an instant success. It remained in the UK charts for ten successive weeks in early 1967.   It was followed by their first album, Are You Experienced?   The band rose to international fame after appearing at the Monterey International Pop Festival in June 1967.   Two other albums followed as well as other live performances.    The band broke up in April 1969 although it re-formed briefly in 1970.   Jimi Hendrix died on 18 September 1970, two months short of his 28th birthday.
14.	During his very short career Jimi Hendrix came to enjoy, and has since his death continued to enjoy, enormous popular and critical acclaim with many devoted followers.   He is widely regarded as one of the most influential of popular musicians.   He is listed at number 6 in Rolling Stone magazine’s The Immortals: The 50 Greatest Artists of All Time and at number 1 in that magazine’s 100 Greatest Guitarists of All Time.   The same magazine features all three of The Jimi Hendrix Experience’s studio albums in the top 100 of its list of 500 Greatest Albums of All Time published in 2003.    In the magazine's list of the 25 best ever live performance albums, two of Jimi Hendrix’s albums are included: Jimi Plays Monterey (1966) - released after his death - and Band of Gypsys (1970). 
15.	It seems that the UK, and London in particular, had a special significance for Jimi Hendrix and his followers.   It was from this country that his rise to fame and fortune was launched.   This was the Britain of the “swinging sixties”.   I was told that on record sales alone over one million Jimi Hendrix albums have been sold in the UK and that he was one of the first to appear in the UK Music Hall of Fame, joining such celebrated British artists as The Beatles and Cliff Richard.  
The RAH Concert 
16.	The live concert performance at the Royal Albert Hall on 24 February 1969 – the RAH Concert -  was the culmination of a two-month European concert tour by The Jimi Hendrix Experience and, as it later turned out, was to be the band’s last live performance in the UK.   There were in fact two concerts at the Royal Albert Hall: there had been a concert there six days earlier, on 18 February.   The 24 February concert is widely considered to be one of the greatest ever live performances by the band.   As I have mentioned it was filmed and recorded by Mr Goldstein and his associate, Mr Steve Gold. It had been Mr Goldstein, a successful producer and song writer based in Hollywood, who had introduced Jimi Hendrix to Chas Chandler who in turn took Jimi Hendrix to London in 1966 to form The Jimi Hendrix Experience.   As a result of this, Mr Goldstein, as he told me and I accept, secured the merchandising rights for The Jimi Hendrix Experience which he exploited, with considerable success, through a company called The Visual Thing Inc.   It was in his capacity as chief executive officer of that company while on tour with The Jimi Hendrix Experience in the US in the autumn of 1968 that he conceived the idea of filming the concert tour of Europe fixed for the band early the following year. He obtained the right to do so by an exclusive recording contract with Jimi Hendrix and his agent, Mike Jeffrey, dated 12 December 1968.   
17.	Mr Goldstein was able to hire the sound recording services led by a person whom he considered the best in the field, a Mr Glyn Johns, and a top-flight film crew under the leadership of a commercial film maker called Nick Hague.   A decision was made to light the Royal Albert Hall as one would for a film set.   Following the 18 February concert, the lighting was improved for the 24 February event.   In addition, Mr Goldstein decided to take personal control of the sound recording.  Jimi Hendrix cooperated fully in all of this, arranging the songs specifically for the event and providing input in advance of the concert on the position of the four colour cameras that were to be used and on microphone and amplifier levels.   In addition to the concert itself, the film crew captured other events on the day, including shots of Jimi Hendrix in his London flat before the concert and at an informal “jam” session at a London nightclub after the concert.
18.	It would seem that Mr Goldstein and his associate were in no great hurry to edit and produce the film.   They were still in the process of editing it in September 1970 when Jimi Hendrix died.   Following that tragic event, work on the film stopped and, as Mr Goldstein described it, the film was put “in a vault”.  There it was to remain, unprocessed, until 2002.  In the meantime, Jimi Hendrix’s musical legacy underwent various vicissitudes and was the subject of disputes until, eventually and following legal proceedings in the US, the first claimant gained control of it, essentially the rights relating to Jimi Hendrix’s musical compositions, recordings and performance rights.  
The claimants
19.	Experience Hendrix, the first claimant, is a limited liability company formed in Washington State and is owned and controlled by Jimi Hendrix’s family.   Its controlling shareholder, president and chief executive officer is his sister, Janie Hendrix.   Its evidence before me was given by its Catalogue Manager, John McDermott, a devoted and long-time Hendrix fan who was hired by Experience Hendrix in September 1995 to document the existing Hendrix tape library and supervise the analogue and digital duplication of its entire contents.   His role has been the management and production of all Jimi Hendrix CD, DVD, television and radio projects as well as supervising the marketing, promotion and retail sales campaigns proposed by Universal Music Group which, as I shall explain later, had an exclusive licence in relation to certain (at least) of the material owned by the first claimant.    Mr McDermott has an impressive knowledge of the Jimi Hendrix musical legacy, having among other assignments co-authored several books, published a number of articles and contributed to radio and television programmes about or concerned with the artist.  He came across as an honest witness who told things as he genuinely believed to be.  At times he seemed unable, or possibly unwilling, to accept the force or logic of the point being put to him in cross-examination.  This was notably so when he was questioned about the first claimant’s meagre disclosure and its failure to deal adequately with requests for further information.  This undermined his credibility on issues of quantum.
20.	The Last Experience Inc., the second claimant, is a corporation formed in California.  It is owned and controlled by Mr Goldstein.  It holds the legal right to the copyright in the Recordings.  Its sole project, according to Mr Goldstein’s evidence, is and has been the exploitation of the RAH Concert material.  As I have mentioned it was Mr Goldstein who financed, produced and directed the film and sound recording of the RAH Concert.  On a number of occasions, the second claimant has been suspended from the Californian register of companies.  This has included the period between 29 July 2002 and 15 February 2007 and again (during the currency of these proceedings) in July 2009. I do not consider that these suspensions matter although they may be thought to shed some light on the extent to which, while suspended, the second claimant was actively pursuing the RAH Project.  This goes to one of the issues I have to decide, namely when the Project would realistically have come to fruition if the covermount had not appeared.  As I have mentioned it is the claimants’ case that by September 2006 work on the Project was nearing completion and that its formal launch was expected to take place in the second quarter of 2007.  
21.	Mr Goldstein gave a somewhat theatrical performance in the witness box.  He was prone to exaggeration and I did not find him particularly credible.  That was especially so when it came to matters of quantum.  I had the impression that he was reliant on others for the figures.  He seemed more concerned with the “big picture” than with the detail.  
The rights in play
22.	Before embarking on a consideration of the issues that must be decided it is helpful to have in mind the rights that are in play and how they relate to one another.   They were helpfully summarised in the defendant’s opening skeleton argument: (1) copyright could be asserted in the Recordings so as to prevent unauthorised copying of them but not so as to prevent the making or distribution of  other recordings of the  Performances or of other performances of the same musical compositions; (2) the performer’s property rights in the Performances could be asserted so as to prevent the making or distribution of unauthorised recordings of them but not so as to prevent other performances of the same musical compositions or the making or distribution of other performances of them; and (3) copyright in the musical compositions could be asserted so as to prevent unauthorised performances of those compositions and also the making and distribution of unauthorised recordings of performances of those compositions.
23.	These proceedings are concerned with the first and second of those rights, namely the Recordings of the Performances made by Messrs Goldstein and Gold with (relevantly) the consent of Jimi Hendrix and the other members of the Jimi Hendrix Experience.  They are not concerned with copyright in the musical compositions.   There is no dispute about any of this.
The basis for the claim in damages 
24.	In the case of copyright in the Recordings, section 96 of the Act makes infringement of it actionable by the copyright owner, namely (as found by Warren J) the first claimant.   The section entitles them as such owners to “all such relief by way of damages… as is available in respect of the infringement of any other property”.    In the case of the Performances, that is, the property rights in the Performances, section 191I of the Act makes infringement of them actionable by the rights owner, namely (again as held by Warren J) the second claimant (subject to a disputed claim to equitable ownership by the first claimant which was only resolved two years later).    The same provision confers on them, as such owners, a like entitlement to damages when those rights have been infringed.
25.	There are two areas of factual investigation into past events with which I must deal.    The first concerns the events leading up to the making and distribution of the covermount.   It is necessary to set out how it came about that the particular covermount was selected for the 10 September 2006 issue of The Sunday Times and what knowledge the defendant had of the claimants’ rights at that time.   This is relevant to the application of article 13 of Directive 2004/48/EC (“the Directive”) and its equivalent enactment in Regulation 3 of the Intellectual Property (Enforcement etc) Regulations 2006 (SI 2006 №. 1028).   It is or may also be relevant to the application of sections 97(2) and 191J(2) of the Act concerned with the award of additional damages having regard, in particular, to the flagrancy of the infringement and to any benefit accruing to the infringer by reason of the infringement.    (The two provisions are materially identical except that section 97(2) relates to copyright infringement and section 191J(2) to infringement of a performer’s property rights.)
26.	The second area of factual investigation concerns the claimants’ intentions in respect of the RAH material and what action they took after the covermount appeared and why.   These matters go to the basis of their claim to damages, in particular whether (without prejudice to other defences) they should be limited to the payment of a royalty or licence fee for the use of the material in the covermount or whether, as they primarily contend, the claimants are entitled to be compensated for all losses that they can show that they suffered as a result of the distribution of the covermount.   If it is the latter, I must come to a view on what would have happened if no covermount had been distributed (i.e. determine when the Project would have been launched) and what the delay is to that launch caused by the distribution of the covermount.
27.	Depending on my conclusions on these matters I must assess, if I can (Mr Hobbs contended that the necessary evidence has not been forthcoming), what loss the claimants have suffered by reason of that delay.    Relevant to this will be whether such loss is confined to the United Kingdom or whether it includes loss which the claimants can show that they suffered elsewhere in the world.
The covermount 
28.	With that introduction I deal first with the events leading up to the making and distribution of the covermount.
29.	As I have mentioned, a covermount is a free CD or DVD provided to newspaper readers in the UK and, depending on the terms of the relevant licence, in the Republic of Ireland.   Covermounts are not included in copies of UK newspapers distributed abroad because of licensing restrictions.   The use of covermounts is one of the recognised ways in which newspapers increase their circulation. Their use in this way started in about 2000.  Mr Nathan McPherson who worked for The Sunday Times between 2000 and 2007 in promotion and brand management (rising to Senior Promotions Manager for the The Sunday Times in June 2005) stated that by 2000 The Sunday Times and its sister paper, The Times, were carrying between five and ten covermounts each year.   (That figure has since dropped owing to a dwindling of the effectiveness of that form of promotion.)  Each year’s promotions budget for the two newspapers would provide for the production of covermounts, as well as the cost of television and radio advertising.   As the years passed, the emphasis in covermount content shifted from film to music.
30.	In 2004, the defendant retained The Communications Practice Ltd (“TCP”) to provide content and promotional ideas to support the marketing strategies for The Times and The Sunday Times. TCP is a marketing communications agency which was established by Mr Timothy Watkins in 1998.   It operates on mainland Europe and elsewhere as well as in this country.    Its UK client base includes national newspapers (not confined to those published by the defendant) and leading content and broadcast owners in the fields of music, film and TV.   It claims to be the market leader with a 75% share of the market.   Mr Watkins’s evidence was that TCP had been involved in 51 covermounts for the The Times and the The Sunday Times.   In some cases, material would be sourced by the defendant directly from the rights holders of it, in which case TCP would be instructed simply to manufacture the covermount.    In others, TCP would be instructed to source the material and manufacture the covermount.   The practice was for the defendant’s relevant promotion teams to have regular meetings with TCP to discuss the timing and requirements of forthcoming promotions and select the material sourced by TCP as content for the intended covermount for consideration and decision by the defendant’s relevant editorial team.   The licence fee paid by the defendant’s newspapers depended on the artist whose music was to be featured in the covermount and on the quality or availability of the content.   The decision on content would generally be made four to six weeks in advance of the promotion for which it was required.   A master CD would be prepared and an order placed with TCP to begin production.    It was for TCP to obtain and pay for the necessary licence (or licences) for the tracks to be included in the covermount.   The defendant was not involved in the negotiation for (and was not aware of) the licence fee paid by TCP for the rights to use the chosen content.   
31.	Although there was no industry standard for this, the fee for the covermount licence paid by the defendant depended upon the content but usually ranged from £50,000 to £100,000 per covermount.  It might exceptionally exceed that figure in the case of a high profile film or music CD.   In addition, there would be fixed rate sums to be paid to MCPS to cover musical copyright in the compositions.   And there would also be the cost of producing the covermount itself together with any pre-marketing of it.   Before placing its order with TCP, the defendant’s relevant editorial and promotion team would select the artwork for the covermount sleeve.   It would be for TCP, once the order was placed, to arrange for the manufacture of the covermount.   The newspaper would only become involved again once the covermount, with its sleeve, had been delivered to the organisation engaged to “poly-bag” the covermount with any printed material to be included in that particular edition of the newspaper.   Any covermounts returned would be destroyed.
32.	In the summer of 2006, following a decision by the defendant to increase the price of The Sunday Times from £1.80 to £2.00 in September 2006, it was decided by senior management that there would be three covermounts, each on successive Sundays, starting with the 10 September 2006 issue, being the date of the increase to £2.00.   In the event, the covermount selected for that issue was the Jimi Hendrix music CD - the covermount in issue in these proceedings - with a Johnny Cash music CD for the 17 September issue and a Ryder Cup DVD for the 24 September issue.  How it came about that the Jimi Hendrix CD was selected was as follows.
33.	In the late spring/early summer of that year, Mr Watkins had been approached by a Mr Moran of Elite Music and Leisure Ltd (“Elite”), an intermediary music licensing specialist with which TCP had worked for several years in relation to covermounts, with regard to the availability for licence of Jimi Hendrix tracks from the RAH Concert for the purpose of a covermount promotion.   Mr Watkins contacted a number of newspapers to pitch the material for use in a covermount, including Mr McPherson and a colleague, Louisa Jones, at the defendant.    This was in mid-June 2006.   Interestingly, the defendant’s expert on the use of covermounts, Andrea Harris, Head of Promotions at The Mail on Sunday, was offered the chance to use the same Jimi Hendrix material.   She did not do so for two reasons.   The first was, as she put it in her witness statement: “…the fact that the Hendrix estate [i.e. the first claimant] are notoriously litigious (and from my general understanding do not hesitate to litigate over anything they decide to take issue with).”  The second was the poor quality of the recordings.      
34.	At a meeting with The Sunday Times’s promotions team, held at about that time (mid-June 2006), Mr Watkins and a colleague from TCP made a presentation of several options for use in the intended covermounts.   The Jimi Hendrix material was just one of them.    The promotions team knew nothing about the circumstances of the RAH Concert from which the material derived.  Indeed, their preference was for studio content as distinct from a live concert.   
35.	In the event the promotions team selected the Jimi Hendrix and certain other material for the September covermounts and presented their selection to the newspaper’s editorial team for final decision.   In due course the editorial team selected ten tracks from the Jimi Hendrix material for the 10 September covermount.   The order in which those tracks ultimately appeared in the covermount was unchanged from their order in the master CD, except that the four tracks that were not selected were simply omitted.   
36.	As it happens, the defendant had been offered the same material by another agency (called Spin) but in view of its longstanding relationship with TCP gave TCP the opportunity at a meeting with Mr Watkins in early July 2006 to source the material for use in the covermount.   Keen not to miss out on this opportunity, Mr Watkins then pursued his negotiations with Elite to obtain the necessary rights.
37.	In August 2006 the defendant placed an order with TCP for the production of the covermount containing the ten tracks selected.    The fee paid to TCP for the necessary licence to use the tracks was agreed at £70,000 and, in due course, the defendant paid TCP a little over £122,000 for the cost of producing and delivering the required number of covermount CDs.
38.	As it turned out, when approached by TCP, Elite had difficulty in obtaining the necessary licence to use the material.   Instead, Mr Watkins of TCP made a direct approach to the licensor (as it was understood to be), an organisation called LicenseMusic which was based in Denmark.    This resulted in a licence agreement dated 24 August 2006 between LicenseMusic and TCP for a non-exclusive licence to produce 1,565,500 copies of the covermount (a number based on an estimate by the defendant’s circulation manager) for distribution with The Sunday Times on 10 September in the UK and Republic or Ireland.   The agreement described the label credits for the tracks as “an original Everest Records Group/Last Experience Inc recording”.  LicenseMusic warranted to TCP its authority to grant the necessary rights and agreed to indemnify TCP against the consequences of any breach.     
39.	In due course the sleeve for the covermount produced by TCP under its arrangements with the defendant, and also the label on the CD itself, included acknowledgements stating that the CD was “Licensed from LicenseMusic.com ApS courtesy of Everest Records Group/Last Experience Inc” and that “The producers of this CD have paid the composers and publishers for the use of their music.   All rights of the producer and of the owner of the recorded works reproduced reserved.   Unauthorised copying, hiring, renting, public performance and broadcasting of this record prohibited.    For promotional use only - not for sale”.  The sleeve and label also contained the MCPS logo. 
40.	The separate arrangements between TCP and the defendant were subsequently set out in a signed agreement entered into in early September 2006.   They provided for the sale to the defendant of 1,565,500 copies of the CD and for the grant to the defendant of the necessary licence to promote the CD for distribution with The Sunday Times on 10 September 2006 in the UK and the Republic of Ireland.  TCP warranted its authority to enter into the agreement and that it had all consents and had paid all the fees necessary for the promotion.   It agreed to indemnify the defendant against the consequences of any breach of its obligations subject to a £5 million limit.   It was for the defendant to pay the necessary mechanical copyright licence fee and in due course (around mid-October 2006) it did so. It paid MCPS £111,933.29 for this. 
41.	In accordance with these arrangements, on or about 25 August 2006 LicenseMusic supplied a master CD of the ten tracks specified by the defendant.   The following day TCP instructed GM Records, based in Poland, to manufacture the covermount for distribution and supplied the necessary artwork for the sleeve together with the master CD of the ten tracks for replication.
42.	On 30 August 2006 Pam McMillen of TCP contacted Tamara Kearney, the first claimant’s Director of Music Licensing to obtain some “video footage of Jimi Hendrix performing (ideally Hey Joe), for use on a national TV commercial. She stated that the footage would be used to promote a CD covermount that would be featured in a national UK newspaper. Ms Kearney redirected Ms McMillen elsewhere.  In the event the matter was not pursued.
43.	On or about 5 September, GM Records delivered the 1,565,650 copies of the covermount to the defendant’s packaging provider to be poly-bagged together with the various supplements and other material for insertion into the 10 September edition of The Sunday Times due for sale in the UK and Ireland the following weekend.  The actual poly-bagging process began very early on Thursday 7 September.  It was due for completion by 4pm on the Saturday following which the poly-bags were then to be sent to wholesalers throughout the UK in readiness for delivery with the newspaper itself to the retailers for sale to the public. The evidence assumed, and I accept, that this is what occurred on that occasion.  
44.	This brings me to the correspondence and other actions in the days leading up to and immediately following the appearance on Sunday 10 September of the covermount.     
45.	On Wednesday, 6 September, Eversheds, acting at this stage for the first claimant alone, wrote to the defendant to say that their client owned the rights to most of Jimi Hendrix’s songs and recorded music, including copyright in the recordings and ownership of the performer’s rights in his performances (at both concerts) at the Royal Albert Hall in 1969, and that it was understood that the defendant’s proposed covermount for the following Sunday’s edition  of The Sunday Times would include RAH material.   The letter asked which tracks were to be included on the covermount and the basis upon which the defendant claimed to be entitled to reproduce them.  It referred to two judgments in the first claimant’s favour affirming its ownership of the performer’s rights in various performances by Jimi Hendrix.   It sought confirmation that the defendant would not offer the covermount.  It threatened proceedings if the confirmation was not forthcoming.
46.	On receiving a copy of the letter Victoria Silberbauer, the senior lawyer responsible for commercial matters in the defendant’s corporate legal affairs department, immediately contacted Mr Iverson of Eversheds to say that she had received his letter and would investigate the matter.  She also contacted Mr Watkins of TCP (from whom, she ascertained, the covermount had come) to tell him of the letter.   Mr Watkins told her that the CD had been licensed by a company called Charly. Ms Silberbauer said that at the time she had no knowledge of Charly.   She was told by Mr Watkins that he had asked Charly to produce evidence of their title to license the tracks.   
47.	By this time, Mr Watkins had become aware that, as he put it, “LicenseMusic was connected with Charly Records”.   As a result of Ms Silberbauer’s call, he had contacted a Mr Erik Jung of LicenseMusic who assured him that LicenseMusic had good title and that “although we might be in for a ‘white knuckle ride’ given the certain litigation and the [first] Claimant’s litigious reputation” the title was good so everything would be alright in the end.   Mr Jung agreed to send Mr Watkins the chain of title to prove the genuineness of LicenseMusic’s licence.     During the course of that day Ms Silberbauer was kept informed by Mr Watkins of his communications with LicenseMusic.   In due course she contacted Mr Jung direct who said, and she duly reported this later to Mr Iverson of Eversheds, that LicenseMusic had a licence from Charly Acquisitions Ltd which, in turn, had an arrangement with Everest Records Group and the second claimant.   She told him that he could expect a call from LicenseMusic’s lawyer.
48.	In his witness statement Mr Watkins stated that he looked up Charly Records’ website and ascertained, and took comfort from the fact, that “the RAH Material along with other tracks from the same concert was at that time available for purchase on CD and apparently had been for some time previously.”   He stated that he was also aware that one track from the concert, Purple Haze, (it was one of the tracks to be included on the covermount CD) had featured in a covermount promotion by The Independent.   Mr Watkins went on to state that as a result of his conversation with Mr Jung and his own research “I believed at the time that the licence from LicenseMusic was genuine” and that if he had thought otherwise he would have alerted the defendant with a view to withdrawing the covermount.   Mr Watkins was not cross-examined on his witness statement and I have no reason to doubt his account of events and, in particular, his belief at the time that the covermount had been properly licensed.   
49.	Two observations are perhaps pertinent at this point.   The first is that Charly Records had and, as I understood it, still has a very poor reputation in the music industry.  Ms Silberbauer was asked about this.  She stated, and I accept, that at the time she was unaware of Charly’s reputation. The second is that, as Mr Watkins stated and indeed as was common ground before me, a number of audio recordings of the performances at the RAH Concert are and had been for some time available for purchase by the public.  Charly Records and others have issued and purported to license others to issue CDs featuring material from the RAH Concert.  These products have been made available through a variety of outlets, including record shops and online via several websites.  In addition, audio and audio-visual recordings of the Concert were available on the You Tube website and the evidence suggests that they have been viewed by an appreciable number of people.  With the exception of Voodoo Child and Little Wing the tracks all seem to have come from the monophonic recordings of the Concert.
50.	Later on 6 September Ms Silberbauer received a fax from a Mr Paul Lambeth of a legal practice called “Ent-Law”, based in Southampton.  Mr Lambeth stated that he represented Charly Licensing APS and that he also acted for Charly Acquisitions Ltd which claimed rights in the recordings in issue.   The letter stated that since 1999 he had been corresponding with the first claimant and Eversheds “concerning their and my clients’ claim to rights in these recordings” and that “despite their vociferous claims they have never pursued them beyond correspondence.”  He attached some copy letters.  The faxed letter went on to say that his client, presumably one of the Charly entities, had instructed leading counsel specialising in copyright matters to advise on its chain of title and that “whilst that advice is protected by legal professional privilege and is confidential I can tell you that his advice was positive as to my client’s title”.   The letter then added: “If you wish to come to my office my client is happy to let you see the note of his advice (provided that this can be done without waiving privilege in the same) but for obvious reasons I am not prepared to supply a copy of it”.  This was not an offer which Ms Silberbauer pursued, either at the time or subsequently.
51.	Mr Lambeth’s letter went on to assert that Charly was “the beneficiary of a license [sic] to rights in master sound recordings containing performances of Jimi Hendrix… made at the Royal Albert Hall …on 24 February 1969…” and that the recordings were made as “part of the making of a…film on Jimi Hendrix’s European Tour in 1969” - a reference no doubt to the film made by Messrs Goldstein and Gold.   Mr Lambeth’s letter then set out, by reference to various documents, his client’s title to the recordings and invited Ms Silberbauer to inspect them at his office.   This was another offer which Ms Silberbauer did not pursue, either then or subsequently.   Neither did she ask for copies of the documents referred to in the letter.   The letter then referred to various proceedings brought by the first claimant.  It stated that these related to different recordings from those made at the RAH Concert and that he had invited the first claimant and Eversheds to explain why in their view the judgments in question confirmed the first claimant’s right to the RAH Concert recordings but they had not done so.
52.	Ms Silberbauer invited Mr Lambeth to contact Eversheds in the hope that between them they could (as she put it in cross-examination) “sort out” the dispute.  Although she had not checked any of the documents referred to in the exchanges of correspondence, her view at the time was that the dispute was not “easily resolvable on its face.”  It was not clear to her, she said, that Eversheds were correct in their assertions.  Her concern was “to find out what the situation was” before seeking a decision on what to do about the covermount.
53.	On Thursday 7 September, Eversheds wrote again to the defendant, this time marked for Ms Silberbauer’s attention.   The letter referred to the defendant’s claim - as a result of what Ms Silberbauer had told Mr Iverson of Eversheds the previous day - that the right to the recordings in the forthcoming covermount had been licensed via Charly Acquisitions and that the first claimant had accepted that Charly had a good chain of title to the recordings.   It denied that that good title existed, sought information about the tracks to be included on the covermount and reiterated the first claimant’s ownership of the copyright and performer’s rights in the Performances.   It set out in some detail, and enclosed documents to support, the first claimant’s chain of title to the copyright and the performer’s rights in question, mentioning in particular that the first claimant was in the process of preparing a CD of the material for release in March 2007.   It warned that by issuing to the public copies of an unauthorised CD the defendant would be infringing the first claimant’s rights.   It stated that “Charly Records in previous incarnations has simply avoided judgments obtained against it in appropriate jurisdictions by going into liquidation and then re-forming”.   It again sought confirmation that the covermount would not be issued.
54.	Ms Silberbauer said in cross-examination that the whole situation, as it was evolving in the course of these various communications, gave her concern and that she decided to seek advice from the defendant’s external lawyers, Harbottle & Lewis.  She proceeded to do so.
55.	Later that same day, Mr Watkins e-mailed Ms Silberbauer to say that the tracks on the covermount had been exploited on a number of occasions before and that individual tracks had been licensed by newspapers for covermount use.   He attached a screen-shot of the Charly website advertising for sale CDs carrying the Charly label on which all (or all but one) of the tracks on the intended covermount CD were included.
56.	By now, late on 7 September, the process of poly-bagging the covermount CD with other sections of the forthcoming edition of The Sunday Times was underway.   It had started early that morning.   
57.	In her witness statement Ms Silberbauer said this about the practicability of calling a halt to the poly-bagging process at that stage: 
“9.   	…I was told by I believe Nathan McPherson that there was no way in the world that it would be possible at this late stage just to remove the CDs from the polybags and continue to distribute The Sunday Times as normal.   Our only alternative to distributing the newspapers with the CD would have been to withdraw distribution of the polybag.    This would have disappointed over a million of our regular readers in the United Kingdom.
10.	We would also have had to cancel planned TV and radio advertising as by this point it would have been far too late to change them.   The TV and radio advertisements that had been created for that week only mentioned the Hendrix CD as an incidental to the main advertisement but if the advertisements had been cancelled, this would have affected marketing for The Sunday Times generally.
11.	The withdrawal of the polybagged material would have resulted in significant loss of revenues as we would have to have returned all of the advertising revenue we had received for at least that week’s edition of magazines, costs to the business of penalties charged by the TV and radio stations for cancellation of bookings, the lost costs of production of those TV and radio ads, the lost impact of that advertising.
12.	I did not believe that this was a reasonable or proportionate course to take, particularly in view of the fact that at this stage there remained very much an issue as to whether or not we had the right to distribute the CD, and the party to whom we had licensed the CD, and who had indemnified us for any and all losses arising as a result of distribution of the CD, were insisting that they had obtained valid rights in the CD.”
58.	In cross-examination Ms Silberbauer was anxious to emphasise the dilemma which faced the defendant when confronted with the claims advanced in Eversheds’ letters when set against the contrary claims by Ent-Law: “…time” she said “was a very key issue in this series of events…we were in a very difficult position of being caught in the middle of two conflicting claims, and, as I said, the time issues at that point and the practicalities of ripping apart our newspaper made it very difficult for us to comply with Eversheds’ request to discontinue distribution” and, later in her cross-examination, “Certainly by 7 September, there was – without ripping apart our own product and putting out a very deficient product, there was pretty much nothing we could do.” 
59.	So the poly-bagging continued.   Later that same day, Mr Lambeth of Ent-Law wrote again to Ms Silberbauer.   He asked to be supplied with copies of Eversheds’ letters to the defendants.   She had thus far omitted to send them.   He also informed her that LicenseMusic and Charly Licensing APS were one and the same, and that it was a Danish company.
60.	On 8 September, not having received a written reply to the previous day’s letter (or for that matter to the opening letter on 6 September), Eversheds sent a further letter, their third on the matter.   It assumed, in the absence of confirmation from the defendant, that the covermount CD would consist of RAH material.   It attached copies of further documents in support of the copyright claim.   It referred to recent proceedings successfully brought by MCA Records Inc against Charly Holdings UK and other Charly entities (reported at [2001] EWCA Civ 1441; [2002] EMLR 1) and to Charly’s refusal to pay the judgment that MCA had obtained.   
61.	It referred also, at some length, to the first claimant’s plans for the RAH material.   Because of their importance, I set out in full what the letter said about them:
“We are instructed that Jimi Hendrix’s concert performance at the Royal Albert Hall on 24 February 1969 is considered one of his most important by many Hendrix fans and critics alike.
By way of further background, after consultation with Jimi Hendrix and his management, several European concerts, including the Royal Albert Hall concert were filmed and recorded by producers Steve Gold and Jerry Goldstein for a planned motion picture that was never released.  As stated in our letter dated 7 September 2006, our client now owns the audiotapes, copyright and performer’s rights in that material for the reasons set out therein.
Due to various factors, including the commercial appeal of releasing the film and soundtrack together, there has never been an authorised official release of an audio album containing this material. The material has been bootlegged in inferior quality versions for several decades, in most cases through unauthorised licences made by Bernard Solomon, the former accountant for Gold & Goldstein, who obtained copies of the audio tracks through his association with their production companies Last Experience Inc. and Far Out Productions. Solomon was never authorised to release this material by Gold & Goldstein, and did so only after he was no longer associated with them. Experience has monitored the major CD retailers and when these bootlegs have appeared available to the public, Experience has sent letters requesting their removal. The major retailers have generally cooperated in doing so. 
The original audio masters from this concert have long been in the possession of Experience Hendrix and its predecessors in interest, following the 1984 Settlement Agreement referred to in our letter dated 7 September 2006. The original motion picture film has long been in the possession of filmmaker Jerry Goldstein. After many years of negotiations, Experience concluded an agreement with Mr Goldstein to produce a motion picture and soundtrack album, which are scheduled for release in March 2007. 
Experience has rearranged its schedule of CD releases so that the Royal Albert Hall film and soundtrack album can be released together, because such a joint release will optimise the publicity and promotion for both products. Experience and Mr Goldstein have invested a tremendous amount of time and money over the past few years in producing the finished film and soundtrack album masters for the planned joint release. Completion of this extensive work is almost finished and release of the film and CD will be accompanied by extensive publicity. 
You now appear poised to undermine this long awaited release and its publicity by releasing a version of the soundtrack album as a “free” covermount CD packaged with your newspaper which has a readership in excess of 300,000 [sic]. Such a release would clearly damage irrevocably the value of the Royal Albert Hall material, seemingly presenting excerpts from the full performance as a virtually worthless collection of “old news” and the surrounding publicity will obviously undercut Experience’s planned promotion of its own release. There will be confusion in the minds of the public which will inevitably undermine any future sales of the high-quality Experience release just a few months later, at least in the UK, which is a significant market. Moreover, the release of this material credited to the Sunday Times or Charly will create confusion in the minds of Hendrix music buyers as to the legitimacy of Experience as the authorised label for Jimi Hendrix’s music, and confusion as to which Royal Albert Hall album is which. A bootleg label, to endorse its own legitimacy and further its own illegal sales at the expense of Experience, will thus use the “establishment” reputation and presumed knowledge of the Sunday Times. The negative publicity created by this event may spread to other jurisdictions through other media.”
The letter concluded by stating that if the CD should be released the first claimant would bring proceedings claiming substantial monetary damages, including exemplary damages.  (It was common ground that the letter understated the sales of The Sunday Times by a million or so.)
62.	On the same day, 8 September, Harbottle & Lewis replied on the defendant’s behalf to Eversheds’ letters.   Their letter confirmed that the covermount consisted of recordings from the RAH Concert.   It enclosed a copy of Ent-Law’s letter of 6 September to Ms Silberbauer setting out Charly’s case on title to the recordings.   It stated that the defendant was not in a position to determine whether the claim of title was correct.   It set out the steps taken to advertise the covermount CD and that it had already been poly-bagged with the relevant parts of the following Sunday’s edition of The Sunday Times.  It explained that it was too late to stop the process and that, if this were attempted, the result would be to jeopardise the prospect of The Sunday Times being distributed to many parts of the UK and that, if this happened, the defendant would suffer huge but unquantifiable losses.   It contended that the appearance of the covermount would be unlikely to cause the first claimant much if any loss.   It suggested that no steps be taken to injunct that Sunday’s edition. 
63.	There the matter rested.   No attempt was made to injunct the defendant from issuing the covermount CD.   As I have mentioned, a little over 1.37 million copies of the CD were included in the edition of The Sunday Times sold in the UK and the Republic of Ireland on 10 September 2006.
64.	Apart from a brief exchange of letters the following week over whether the defendant was proposing to issue a further covermount CD containing Jimi Hendrix songs - it quickly became apparent (but not before Harbottle & Lewis had sent two less than helpful replies) that this would not be so - the next that was heard in the matter was a letter from Eversheds on 7 March 2007 stating that it now represented the second claimant as well and that proceedings would shortly be issued.   This duly occurred on 13 March 2007.
Article 13 of the Directive
65.	I have dealt at some length with these events, in particular whether the defendant knew or had means of knowing that the issue of the covermount would be an infringement of the claimants’ rights, because they go to the question whether, assuming the claimants can establish causation, damages are to be assessed by reference to paragraph 1 or to paragraph 2 of article 13 of the  Directive. They also go to whether additional or flagrancy damages should be awarded under the 1988 Act.   
66.	It was common ground that article 13 applies.   It is by reference to the wording of the article rather than its equivalent domestic enactment as regulation 3 of the 2006 Regulation that I approach the issue.    (For what it is worth, however, I do not think that for the purposes of deciding the issues that arise regulation 3(1) is materially different from article 13(1).) 
67.	Article 13 is as follows:
“1. Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.
            When the judicial authorities set the damages:
(a)  they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;  or
(b)  as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.
2.   Where the infringer did not knowingly, or with reasonable grounds know, engage in infringing activity, Member States may lay down that the judicial authorities may order the recovery of profits or the payment of damages, which may be pre-established.”
68.	As Mr Hobbs explained, paragraph 1 of this article gives rise to a variety of difficult questions of construction.   The first issue which I have to decide is whether it applies at all: if it does not, then paragraph 2 applies and the damages are to be assessed in accordance with principles laid down by domestic law for cases of infringement of intellectual property rights.   (Although regulation 3(3) is differently worded from article 13(2) its effect is the same.)    Whether paragraph 1 of article 13 applies and, if it does, whether it is paragraph 1(a) or paragraph 1(b) that is in point turns on whether the defendant “knowingly, or with reasonable grounds to know, engaged in an infringing activity…”
69.	I am in no doubt that at the time the covermount CD appeared on 10 September 2006 the defendant had “reasonable grounds to know” that it was engaging in infringing activity, namely the infringement of the claimants’ copyright in the Recordings and their performer’s property rights in the Performances.   It does not matter, and it has not been suggested that it matters, whether the defendant had the means of knowing whether the copyright and performer’s rights in question were wholly those of the first claimant or of the second claimant or if they were shared and, if shared, how they were shared.
70.	The material to decide that the issue of the covermount would amount to an infringing activity was available to the defendant: it was set out in Eversheds’ letters of 6, 7 and 8 September.    It was on the basis of the material referred to in those letters that Warren J awarded the claimants summary judgment for infringement (both of copyright and of performer’s rights) in early 2008.   The fact that Mr Lambeth of Ent-Law asserted a chain of title in LicenseMusic in his letters to Ms Silberbauer of 6 and 7 September and that she (and I shall assume, others at the defendant) were left in a quandary does not alter the position: the defendant had, at its disposal, grounds for concluding that the claimants’ title was a good one and that LicenseMusic’s was not.   Moreover, those grounds were reasonable ones for so concluding: the issue did not turn on some difficult point of construction or disputed question of fact.   The plain fact of the matter, as Warren J’s judgment shows, is that the documents relied upon by the defendant, when read, did not justify the claim to a chain of title in LicenseMusic whereas those relied on by the claimants did justify their claim.   If Warren J had thought that there were reasonable grounds for resisting the claimants’ application he would not have summarily determined the issue in their favour.  
71.	Mr Hobbs submitted that it was simply the wisdom of hindsight to say that the claims made by Eversheds in their letters of 6, 7and 8 September should have been treated as conclusive of the matter in preference to those made by Ent-Law which relied on a chain of title that had been the subject of correspondence with Eversheds on behalf of the first claimant dating back to 1999 without any proceedings impugning Charly’s claim of title having been commenced.   He submitted that it was important to appreciate that there was no intimation in Eversheds’ letters that they represented Mr Gold, Mr Goldstein or the second claimant.  Anyone reading Eversheds’ letters and comparing what was said by Ent-Law   would understand, he said, that rival claims were being advanced by the first claimant on the one hand and by Charly on the other with Mr Gold, Mr Goldstein and the second claimant as independent external third parties whose actions were being relied on by both of the challengers for title to the disputed rights.  
72.	While I see force in these points the fact is that they do not show that Charly alone could demonstrate a good title.  Moreover the letters from Eversheds made clear the basis on which, as between the first and second claimants (and Mr Gold and Mr Goldstein as individuals), title had come to be in the first claimant.
73.	Mr Jones went further.   He submitted that the defendant was completely indifferent as to whether it was engaging in infringing activities and recklessly so, and that its commercial imperatives and indemnity from TCP meant that it was willing to proceed regardless of whether it would infringe the rights of others; infringement was irrelevant to it.   He submitted that this amounted in law to actual knowledge of its infringing activities. In support of this submission he relied upon the following matters: (1) the defendant’s failure to take up the offer by Mr Lambeth of Ent-Law to inspect the documents referred to in his letter of 6 September (and thus to reach its own assessment of the merits of what Mr Lambeth was asserting) when a brief perusal of just one of them - a letter dated 27 September 1979 - would have alerted any lawyer to the very tenuous and suspicious nature of the chain of title relied upon (the letter, as a link or as evidence of a link in the chain of title, was heavily criticised by Warren J); (2) the defendant’s failure to deal with the criticisms made by Eversheds in their 7 September letter of one of the key documents relied upon by Ent-Law, namely a 1984 settlement agreement; (3) the defendant’s failure to investigate Eversheds’ strictures concerning Charly; (4) the uncertainties, because they were not put forward as witnesses, about what precisely was in the mind of the defendant’s managing director, Mr Paul Hayes, and its chief operating officer, Mr Clive Milner, (or of other senior management of the defendant) when the decision was made to proceed with the covermount notwithstanding Eversheds’ warning letters (which both those persons were shown) and whether management, as distinct from Ms Silberbauer, was even aware of Ent-Law’s two letters; (5) the defendant’s unwillingness after receiving Eversheds’ letters to halt the process of poly-bagging the covermount CDs with other material for the 10 September edition of The Sunday Times on the ground that it was impractical to do so at so late a stage and that to do so would result in a substantial loss of advertising and sales income and would damage The Sunday Times’ reputation (not least in view of the TV, radio and other advertising for that Sunday’s edition); (6) Ms Silberbauer’s acceptance in cross-examination that if the letters received from Eversheds in the week leading up to 10 September had been received three weeks earlier, the covermount would not have been issued, at any rate until the questions raised by the correspondence had been sorted out; and (7) the defendant’s failure, despite having the time to do so once the decision was made by late July 2006 to use the RAH material for a covermount, to research the provenance of that material.
74.	Having carefully reviewed the evidence on this, including in particular what Ms Silberbauer had to say both in chief and in cross-examination, and the careful written submissions of Mr Jones and Mr Cuddigan both in opening and in closing, I have come to the conclusion that it is not correct to say that the defendant was indifferent, let alone recklessly indifferent, to whether it would engage in infringing activities.    The defendant used the services of TCP, a leading, well established and reputable agency with whom it had an established relationship, to supply and obtain all necessary licences for promotional material such a covermount CDs.   Its contractual arrangement with TCP contained a warranty by TCP that it had all necessary consents.    In these circumstances, the defendant cannot, in my judgment, be criticised for failing to investigate the provenance of the covermount material in advance of receiving Eversheds’ letter of 6 September.  Thereafter it was faced with conflicting claims of title to the material.   Mr Lambeth’s letter to Ms Silberbauer was no less adamant in its claim to title than was Eversheds’ letter on behalf of the first claimant.   In the meantime, Mr Watkins of TCP was continuing to provide Ms Silberbauer with assurances as to the genuineness of the LicenseMusic licence.   Ms Silberbauer and those to whom she was answerable can certainly be criticised for failing to investigate the matter, leaving it to the warring contenders to “sort it out”, and in particular for failing to ask to inspect the documents which Mr Lambeth of Ent-Law had referred to in his letter.   Although I would have preferred to have heard from Mr Hayes and   Mr Milner (or failing them others involved on the defendant’s management side) and not just the hapless Ms Silberbauer who gave every appearance of being left to answer for the defendant, I am not willing to ascribe the defendant’s failure in this regard to an indifference to the rights and wrongs of the competing claims.   The fact is that Eversheds sent their letters only very late in the process.   The first of them arrived on the Wednesday by which time the process of preparing for the Sunday edition was underway, poly-bagging starting very early the following morning.   The defendant was faced with a difficult decision: whether to pull the covermount with all the adverse costs and other consequences described or whether to proceed.   It happens that the defendant chose the wrong course in the sense that Eversheds’ claims on behalf of the first claimant were fully justified.   It is also correct to say that if, once it had received Eversheds’ letters, the defendant had set about investigating the matter with diligence, it could have ascertained in advance of the issue of the covermount that the claims made were justified and also that LicenseMusic - in reality Charly - had a very questionable reputation.   That it did not do so does not, in my judgment, mean that the defendant must be taken to have had actual knowledge (or its equivalent) that it would be engaging in infringing activities if it proceeded.  If it had not cared or was recklessly indifferent about the rights that Eversheds were asserting  but was determined to press on with the covermount given the stage that the preparation of the 10 September edition had reached and the very adverse financial and goodwill consequences to it of not distributing the poly-bagged material, the defendant would not, I think, have taken the steps it did (through Ms Silberbauer) to investigate the matter (poor though that investigation was) and instruct solicitors.  Nor am I prepared to ascribe the steps taken to some kind of cynical exercise of going through the motions of appearing to take the claims seriously when in truth it had no intention of changing course.
75.	I was not persuaded by anything in the authorities to which Mr Jones referred me on this issue that I should reach a different conclusion.   Those authorities were Columbia Pictures v Robinson [1986] Ch 38; ZYX Music Gmb v King [1995] FSR 566; Springsteen v Masquerade Music [1999] EMLR 180 (which, like the previous authority, in so far as it was relied on before me, was referred to for its particular facts rather than for any principle laid down by it) and Nottinghamshire Healthcare National Health Service Trust v News Group Newspapers Ltd [2002] RPC 49.
76.	This conclusion leads me to the further conclusion that damages, if otherwise appropriate, should not be increased by an award of additional damages, whether by reference to flagrancy or “moral prejudice” or any other such considerations.   Quite how paragraph 1 of article 13 should be applied is a matter I shall return to after I have dealt with the second main area of factual investigation, namely (as described in paragraph 26 above) the claimants’ intentions in respect of the RAH material and what action they took after the covermount appeared and why.   It is to those issues that I next turn. 
The claimants’ plans for the RAH material
77.	One of the more noteworthy features of this important aspect of the dispute – as it was of the materials in support of the losses claimed – was the paucity of documentation.  As I have mentioned, the Project involved a full length feature film for release in cinemas across the world, the simultaneous (or near simultaneous) release of accompanying CDs and DVDs, together with merchandising and a variety of promotional initiatives. I would have expected this very considerable project, the planning of and preparation for which, I was told, were sufficiently underway by September 2006 to justify the claim in Eversheds’ letter to the defendant of 8 September 2006 that the film and soundtrack album were “scheduled” for release in March 2007 (no more than 15 or so weeks later) would have generated a great deal of disclosable paperwork.  But apparently not, according to Mr McDermott and Mr Goldstein (effectively the spokesmen for the two claimants). When pressed in cross-examination about this, they both asserted, but not so as to persuade me, that there was no more, or virtually no more, to be disclosed.  No less remarkable was that three and a half years later, by the time of the trial before me, still with no date for the launch yet fixed, the available documentation was scarcely more plentiful.  Indeed, it was only very shortly before the trial started that a draft of the all important distributorship agreement (between the two claimants and Sony Music Entertainment) (“Sony”) was disclosed.  This agreement, which provided for the completion and distribution of the feature film and dealt with a number of other matters, had been signed on or about 17 March 2010.  It was only during the course of the trial that a sheaf of documents was disclosed chronicling (but not in their entirety) the written communications that had led to that agreement.  They revealed that the agreement had its origin in two written offers, both dated 23 July 2009, one from Universal Music Group (the first claimant’s then distributor for Jimi Hendrix back catalogue but with the distribution agreement about to expire) (“Universal”) and the other from Sony. Each had been submitted in response to an earlier invitation by the claimants.  July 2009 was more than two years after the date of intended film release mentioned in Eversheds’ letter of 8 September 2006.
78.	It was fairly urged by Mr Hobbs, both in cross-examination of Mr McDermott and Mr Goldstein and in subsequent submissions, that the claimants’ disclosure was piecemeal, late and almost certainly incomplete and that overall it left a great deal to be desired.  He put the matter rather more forcefully than that.  These shortcomings are matters that bear on the important question of the delay to the launch of the Project caused by the covermount and on the no less important question of the computation of the loss if the claimants are able to surmount that initial hurdle.
79.	In so far as the documentary material revealed, when taken with the oral evidence that I heard, the position with regard to the development of the Project and the impact on it of the covermount was as follows.  I start with the development of the Project up to the time of the covermount.
80.	In 2002 the claimants began work on what was to be the Project.  This followed an approach by Janie Hendrix and Mr McDermott to Mr Goldstein.  It appears, although the details are far from clear, that the two claimants were and had for some years been in dispute over the rights in the film and four-track recordings made of the RAH Concert and of the earlier concert on 18 February.  An understanding was nevertheless reached in June 2003 – and documented in a letter dated 4 June 2003 – that they would cooperate in producing a feature-length film of the RAH Concert and that the costs and eventual profits of the venture would be shared equally.  But this cooperation did not at that stage extend to all aspects of the recording and other rights in play.  Thus it was that when they wrote their various letters to the defendant in September 2006 Eversheds were acting for the first defendant alone.  At the time, the second claimant was suspended from the register of companies in its US state of incorporation.  On 22 January 2007 – at a time when its registration was still suspended – the second claimant purported to enter into an agreement with the first claimant to cooperate in the prosecution of these proceedings (which had not by then been started) and share equally their costs and any fruits arising from them.  The agreement provided that Eversheds would act for them jointly.  It set out the basis on which they would plead their claims, essentially that the second claimant was the legal owner of the copyright in the Recordings and that the first claimant claimed, but the second claimant disputed, that it was the beneficial owner of the Recordings and that the first claimant would assert a claim to the performer’s rights in the Recordings (matters that are indeed reflected in the points of claim).  I can add at this point that in due course a written agreement settling their dispute was entered into, indeed it was only signed on the eve of the start of this trial as it is dated 16 March 2010, by which it was agreed that the RAH material belonged exclusively to the second claimant and Mr Goldstein and that the two of them would take steps to challenge a US copyright registration (adverse to their own claims) of the Recordings which had been lodged as long ago as 1997 by a Ms Laura Pearson and Mr Steve Gold (Mr Goldstein’s erstwhile partner in the making of the Recordings). These are matters I return to later.
81.	Following their decision to cooperate in the Project, the claimants first collected and restored 40,000 ft of 16mm colour film of the RAH Concert.  It included footage of the earlier concert on 18 February.  The restoration phase was completed in 2004.  The restored film was then digitised so that a preliminary assembly of the film footage could be made.  The claimants then discussed the project with senior executives at Universal and there was a screening to Universal of the concert footage.  According to Mr McDermott Universal were enthusiastic about what they had been shown and the commercial potential of the project.  But there were no commercial discussions with Universal at that stage.
82.	In late 2004 The Endeavor Agency (“Endeavor”), a very large and prominent entertainment agency based in the USA (it merged with William Morris in June 2009 to become William Morris Endeavor) was engaged by the claimants to promote the Project, involving a worldwide cinema release of a film of (and about) the RAH Concert, a DVD and DVD box set of the film, a CD soundtrack album and CD box set of performances from the film, music downloads and ringtones, TV exploitation of the film and merchandising initiatives.  There were discussions in relation to some at least of these matters but nothing concrete appears to have emerged at that time.  There is nothing to indicate that any written agreements were entered into.  In this connection I was referred to a so-called status update memorandum for the project prepared by Mr McDermott in May 2005 which set out a production schedule for these and other matters.  It included a “Roll Out Schedule” which set out what Endeavor was to do. It also envisaged a Las Vegas premiere, the film’s screening at film festivals, orchestrated press and marketing campaigns, “Regional Premiere Events” and the securing of a distribution agreement. The schedule is headed “2006” indicating that these matters would occur during the course of that year.  There is little if any evidence that by the time that the project was suspended at the end of September 2006 any of these matters had been progressed.  Indeed the only real progress seems to have been made in assembling and cutting the film footage and in preparing the sound mix for the film and its synchronisation with the footage.  This involved the creation of new digitised stereo and 5.1 surround sound mixes of the four-track audio masters.  In places new background sound effects had to be made and synchronised with the film footage.  Audience sound from the concert had to be recreated as the four-track tapes only recorded the performers.
83.	Mr Stanley Johnston, a freelance sound and music re-recording mixer, gave evidence by video conferencing link from the USA about his involvement with the Project.  This began in 2005 when he was invited by Mr Goldstein to be the sound re-recording mixer and supervising sound editor for the film. He described in his witness statement the work he carried out in 2005 and the first half of 2006 which by June/July 2006 had resulted in the film being ready for what he described as its “final mix”.  According to this evidence there existed by then a quick rough cut mix of the film including all of the sound elements synchronised to the film footage.  It was shortly after this time that Mr Johnston said that he and his team were told by Mr Goldstein to stop any further work due to what he understood was “a legal issue” in England. He was not told what this was about.  There is nothing to indicate that he was aware of the infringing covermount. At the time, the final mix was programmed to start in October 2006.  Studio time for this had been booked.  The work was expected to take about four to six weeks. Mr Johnston’s understanding was that Mr Goldstein wanted to release the film in 2007, in particular for the film festival season starting with the Sundance Film Festival in January 2007. Although he saw Mr Goldstein on a fairly regular basis in connection with other matters over the ensuing months he was only asked to get ready to do the final mix at around the start of this year.  At the time of giving his evidence he was still awaiting the go-ahead from Mr Goldstein to book the studio time for that mix. 
84.	Mr McGuire was (and remains) Endeavor’s (now William Morris Endeavor’s) Legal Counsel.  He also gave evidence by video conferencing link from the USA.  He and Mr Johnston were the only witnesses, apart from Mr McDermott and Mr Goldstein, who gave evidence about the nature and progress of the Project.  The impression given by Mr McGuire’s evidence was that the Project moved forward at a fairly leisurely pace and that eventually, from his standpoint at least, further involvement by Endeavor had dwindled to nothing at around the time of the Project’s suspension in late 2006.  He was not even aware at the time why it was that there was no further progress in the project after late 2006.  In his cross-examination he stated that it was only “months and months” after September 2006 that he was made aware of the distribution of the covermount. (The assertion in paragraph 12 of his witness statement that he heard of the distribution in September 2006 was contradicted by his oral evidence.)  As far as he was concerned, by the time his involvement in the project ceased, the film lay somewhere between a rough and a fine cut and required the attention of a film director, preferably one of repute, to bring what Mr McGuire described as “creative vision” to the film and assist with its marketing.  That said, he did not think that there was a lot that needed to be done. According to Mr McDermott’s evidence, the film (in its then incomplete state) had been screened to a number of the main studios, including Universal, 20th Century Fox, Warner Brothers and Paramount.  But there was nothing concrete to show for this (at any rate so far as the evidence before me suggested) in the form of any kind of written commitment or definite proposal.  
85.	The Project had reached this state when the events of September 2006 took place.  It is clear – there was really no issue about this – that the claimants by then were on course to produce the finished film and fully intended to proceed to its launch, together with the accompanying DVDs and CDs and attendant publicity and merchandising that I have earlier summarised.  The questions are (1) when and why precisely the Project was put on hold, for there is no question but that this happened, (2) when realistically the launch would otherwise have occurred and (3) what delay, if any, to that realistic launch date was caused by the distribution of the defendant’s covermount.
The suspension
86.	The curious thing about the suspension of the Project was the wholly informal way in which it appears to have occurred and the absence of anything in writing to document when exactly it happened and why.  I have already mentioned that the only two independent witnesses called by the claimants who were involved in the Project (Mr Johnston and Mr McGuire) did not know of the covermount’s appearance when it occurred. So far as they were aware there was some kind of legal issue in England concerned with the Project but what it was they seemed not to know. That Mr Johnston might not have known is perhaps understandable but that Mr McGuire of Endeavor, the top-flight entertainment agency engaged to help with the promotion of the Project, did not know until many months later seems surprising, at all events if the reason for the suspension was, as the claimants through Mr McDermott and (especially) Mr Goldstein have stoutly maintained, because of the immense damage to the Project caused by the distribution in these islands of the 1.3 million CDs. For this is how the matter was put by Mr Goldstein in the course of his cross-examination:
“Q.  And so there came a time, did there, on 30 September 2006, when you discussed with your co-partners -- and I am talking about now about the Hendrix people -- you discussed what you should do in response to the Sunday Times covermount, and you decided, without a single document to record it, that you would turn your back on this?
A.  Well, it is not turning our back on this.  We had also had talks with Ari and the people at Endeavor about what had happened.
Q.  And you turned your back on this?
A.  Let me explain something.  I mean, this is the greatest film that has ever been made with Jimi Hendrix.  This is the best recording ever recorded.  This is the best film on him that has ever been done.  It is first class, it is fabulous, it is his legacy, basically, okay.  We get one shot at this, we get one chance to release this right, okay, that is it.  And because of what the Times did to us in, like, this market, which is the place it was filmed, you know, the place where he lived, there is a blue plaque on Brook Street, you know, this was a big market to us.  This was at least a 20 per cent market in this project, okay.  They had crashed this market.  And this is a worldwide release, we are guaranteeing our branding produce, you get your brand on every record, on every CD.  You know, worldwide, simultaneous.  And when you take 20 per cent of the market away and you crash 20 per cent of the market with an inferior product, I mean, we had long talks about it.  I didn't want to stop it, but it wasn't the same project any more.   I couldn't sell the exclusivity when somebody already put out 1,300,000 units, okay.  And it's a different project, and we had to stop, refigure it out, obviously sue the Times, and take stock, knowing that it is still a great movie.  When we get it ready and when it is the right time, it will have its one shot to be a huge success, if you do it right.
Q.  You say --
A.  And we took the fact that we were really injured and stopped for a minute, and wanted to, like, check it out, let the debris disappear, okay.  And to us what the Times did was like 9/11.
Q.  Like what?
A.  They flew the plane into the building and crashed us.
Q.  9/11?
A.  Yeah, flew the plane into the building and crashed us, that is what they did.  This is a year and a half of hard work of a whole lot of people trying to set this up, okay, and it was set up, totally set up until that happened.  And they were told, "don't do it, this is Jimi Hendrix, nobody has the right but us".  They didn't care.  They just did it.  They didn't care what the result was going to be to us, they just did it.” 
87.	And later:
“A.  Well, we were having discussions from the time it happened through the 30th, trying to figure out what to do and how to do it, and what we all came to the conclusion is we had to shut it down for the time being until we could get the debris cleared that the London Times put us into.  ”
88.	Mr McDermott’s explanation for the suspension is set out in his first witness statement in the following passages:
“50. 	As soon as we knew that the Defendant had gone ahead with its distribution of the Covermount on 10 September 2006, meetings were arranged between representatives of Experience Hendrix and LEI.   These culminated in a meeting on or around 30 September 2006 at which it was decided to suspend the project.   The principal reasons for suspending the project are set out below.
51. 	It was clear from the correspondence between the UK lawyers that the bogus Charly licence (which I deal with in more detail below) was now being exploited to a completely unprecedented extent.   Previously there had been a very limited use by an elusive offshore entity, primarily through independent record stores: probably reflecting Charly’s notorious reputation in the market place, the inferior audio quality and in particular the dubious provenance of its RAH concert material.   Now the Charly licence was being relied upon to permit a massive free distribution of a critical Hendrix album in our second biggest market by The Sunday Times, part of a multinational media giant. In the light of this, we realised that our approach to the Charly chain of title had to be revised.
52. 	It was also clear to us that the “licence” relied upon by the Defendant was not limited to the UK, and that it could be used for similarly extensive use of RAH recordings and performances anywhere in the World.   Of course, although we were confident in our exclusive title to the RAH material, this “licence” now represented an enormous commercial threat to our project.
53. 	This threat was exacerbated by the attitude of potential partners.   We could not continue negotiations with commercial sponsors without revealing the existence of the dispute and forthcoming litigation.   It was (and continues to be) my belief that they would have refused to countenance involvement with the RAH project while the issue of the Charly “licence” was unresolved.
54. 	We considered the market for the project’s products, in particular the audio products, would be severely damaged in the UK, which we expected to be one of the biggest markets for the project after North America. The content of the Defendant’s Covermount was very similar to our soundtrack album, albeit that it is of much lower quality. If we had released our audio products as originally planned in around Q1/Q2 2007 (which would have been about 6 months after the Defendants distribution of 1.5 million CDs) we considered that many potential consumers would have already received a free copy of the Covermount and would not purchase our product.   Further, those that did not already own the Covermount could choose to buy a copy very cheaply on eBay, or download a free copy via an illegal file-sharing network.
55. 	The UK is the world’s third largest market for music sales (behind the USA and Japan). In addition, the UK is Jimi’s “spiritual home” where he first gained major fame after being brought to the UK by Chas Chandler in 1966 to form The Jimi Hendrix Experience.   Therefore, the UK is of critical importance to any plans Experience Hendrix has in relation to future releases of Jimi Hendrix material.   In the case of the RAH project, the UK is of additional importance, given that the performances took place in London and were the last performances of the original Jimi Hendrix Experience in the UK.   The UK was intended to be a pivotal territory in the release of the RAH material.   We therefore believed that the project should be put back to allow the market to recover.   We needed to strike a balance between minimising the losses caused by the delay to our project and ensuring that the market had recovered as much as it could.
56.	The project was suspended worldwide and not just for the UK because, as I explain above, the Charly “licence” was a worldwide licence; the UK is a critical market for us; and it was our understanding that the most profitable route to exploitation of the RAH material would have been for a simultaneous worldwide release of all the various elements I describe above.   All our introductory meetings and negotiations with interested third parties had been based on our ability to deliver an array of assets that could be strategically marketed and distributed simultaneously throughout the world.   This was to be expected.   We knew that a major distributor such as Warner Bros. or Universal would either require or make its strongest offer based upon a multi-national deal for as many elements of the RAH project as possible.   This would particularly encompass the theatrical, DVD and CD rights in the US and the UK.
57. 	It is important to recognise the scope of the impact caused by the Defendant’s infringement.   There would have been a significant non-cash value of an association with a major corporate partner.   In exchange for audio (and possibly combined CD/DVD) licences to corporate partners for special promotional associations with the RAH project, we would benefit from increased advertising and awareness of the Film and its ancillary products.
58. 	All these circumstances supported our decision to put the RAH project on hold at least until we had succeeded in obtaining the certainty of a judgment and declarations from the Court confirming our own chain of title.”  
And later,
“69.     As stated above, amongst other things, before restarting work on the RAH project we wanted to wait until after receiving the declarations from the Court as to our ownership.   This came by way of a Court Order in March 2008.   By this stage it was too late for us to finalise the RAH project for a 2008 release (this is despite the fact that in September 2006 (at the time of the Defendant’s infringement) we felt we would have been ready to release the RAH project materials around 6 months later, in around March 2007.”
In cross-examination he said this:
“A.  No.  I think, I hope that I am being clear, my Lord, essentially we took action against the Sunday Times' covermount, the by-product of which was that there was a reliance on an invalid licence from Charly.  That was a part of it, but that has been our effort since September 2006.  It is about the Sunday Times covermount and its impact on our work on behalf of the Albert Hall project.  Charly is a by-product of it, but our focus was this litigation.”
89.	There would appear therefore to have been two reasons why the claimants suspended the Project: (1) a wish, in view of the scale of the covermount distribution, to obtain a declaratory judgment that, even if not a party to the proceedings and not therefore strictly bound by it, Charly had no right to license use of the RAH material, the aim being both to assuage any concerns of the Project’s commercial sponsors over the claimants’ right to exploit the RAH material and to deter others from using any Charly-licensed Jimi Hendrix material; and (2) a concern over the effect on the UK market of the free distribution of 1.3 million inferior quality, bootlegged recordings from the RAH Concert either because, having already received a CD of the concert, members of the public might not be tempted to purchase the CDs and other materials that the claimants proposed to launch on to the market or because anyone who wanted a CD of the concert might be tempted to acquire, at a cheap price, one of the covermount CDs rather than the more expensively priced CDs that would be on offer via the claimants as part of the Project.
90.	Mr Hobbs attacked the sufficiency of those reasons as a basis on which to found any claim for the recovery of damages.    He submitted that the first of those two reasons, the wish to demonstrate by obtaining a declaration against the defendant that Charly had no right to license use of any recordings taken from the RAH Concert, arose out of the claimants’ “flaccid approach” (as he described it) in dealing with Charly (flaccid, as I understood it, because they have hitherto attacked the symptoms of Charly’s actions rather than seek  directly to restrain Charly from engaging in infringing activity), the more so when Charly’s claim to be entitled to license use of the material arose from dealings in which the second claimant had been involved many years earlier.  The defendant, he submitted, could not fairly be said to have caused the problems which actually caused the claimants to stop work on the RAH Project.  It was simply, he said, that they had the misfortune to be caught as the “pig-in-the-middle” between Charly and the claimants.   He attacked the sufficiency of the second of those reasons, the adverse impact of covermount on the UK market and the need “to cure the market” of the effects of the covermount distribution, saying that it had no support in the evidence.
91.	I accept that the claimants suspended the Project at the end of September 2006 for the reasons which they referred to in their evidence and which I have briefly summarised.   As regards the first of those reasons, I do not accept Mr Hobbs’ submission that the defendant’s actions did not in any relevant sense cause the claimants’ decision to suspend the Project.   I do not consider that the fact that the defendant was able to distribute the covermount because Charly (through LicenseMusic) provided it with a false licence or that, as a result, the defendant found itself as “pig-in-the-middle” between Charly and the claimants justifies the view that its action in distributing the covermount was not causative of the claimants’ decision (and therefore of any loss that they suffered which naturally resulted from that decision) to suspend the Project.    Equally irrelevant to causation, in my view, is the fact that Charly’s claim to be entitled to license the RAH Concert material resulted in part from their so-called flaccid approach to dealing with Charly in the past.
92.	As to the second reason for the suspension, the spoiling of the UK market by flooding it with 1.3 million copies of inferior, boot-legged recordings from the RAH Concert, Mr Hobbs’ submission that there was no real evidence that this did any harm goes not to whether the decision to suspend the Project was caused by the covermount distribution but to what loss can fairly be said to have flowed from that decision.   For, if the distribution did not in fact damage the market even though the claimants may have thought that it did, then there can be no basis for claimants to have continued on that ground to delay the realisation of the Project and, by so doing, claim for the loss thereby suffered.   This last submission, I should add, was belatedly formulated into amendments to paragraphs 21 and 27 of the points of defence (for which I gave permission on Day 2 of the trial) to the effect that any damage suffered by the claimants as a result of the suspension was wholly or partly the claimants’ own fault, in short that either there was a break altogether in the chain of causation or the claimants contributed to their own damage.
93.	In their written outline opening argument, Mr Hobbs and Ms Himsworth referred to a number of recent decisions concerned with the scope of duty principle, both in cases of tort and in the field of intellectual property rights, including Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191; Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No.2) [1997] 1 WLR 1627; Platform Home Loans Ltd v Oyston Shipways Ltd [2000] 2 AC 190;  Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 and 5)[2002] UKHL 19;[2002] 2 AC 883;  Coflexip SA v Stolt Offshore Ltd [2003] EWCA Civ 296; [2003] FSR 41; and Paterson Zochonis & Co Ltd v Merfarken Packaging Ltd [1983] FSR 273.  In my view, none of those decisions is in point.    It is plain that the decision to suspend was caused by the distribution of the covermount.   The only question is to assess the loss to the claimants resulting from that decision for which the defendants should fairly be held responsible. 
When realistically would the launch have occurred if there had been no covermount distribution? 
94.	Mr Jones submitted that the evidence of Mr McDermott and Mr Goldstein, coupled with that of Mr Johnston, justified the view that, but for the covermount distribution, the film would have been released globally towards the end of June or the beginning of July at around the time of the July 4 US national holiday, with the CD soundtrack preceding the global release by six or so weeks.   On that basis, he submitted, it was appropriate to take 1 July 2007 as the likely launch date for the Project but for the distribution of the covermount on 10 September 2006.  
95.	I propose to deal with this issue by considering, first, matters concerned with the preparation of the RAH material and the completion of the film and, second, a number of discrete matters referred to by Mr Hobbs which, in his submission, would have delayed if not prevented altogether the planned release.
96.	The evidence satisfies me that the film could have been in a sufficiently complete form for viewing by prospective distributors by January 2007.   The film had already been screened in a less than complete state some weeks before the defendant’s covermount had been distributed.  That left only any modifications to the film that an independent director might wish to make if the film’s distributor had felt that it needed the creative vision that a director could bring.   Subject to agreeing terms with a distributor (a matter I come to later) there is no reason to think that the modifications that the director would want could not have been quickly achieved following the director’s appointment.   Relevant to this is that the film consisted almost entirely, if not entirely, of archived material, being the footage taken in 1969, so that it is difficult to think what modifications, other than purely editorial ones, a director would wish to make.
97.	The evidence I heard suggested that a distributor would want to engage a well-known director, in effect as a marketing asset: the more famous the director the greater the box-office attractiveness of a film associated with that director.   Once appointed, allowing for the time needed to find and engage a director acceptable to the distributor, it is hard to imagine that the director’s input would have taken much longer than a few weeks to complete.    Andrew Orr, the defendant’s expert in matters concerned with sales, distribution and the release of independent feature films, was asked about this: his view, which I accept, was that engaging a suitable director would not have presented a problem in terms of time.   
98.	Taking the evidence as a whole, I am satisfied therefore that the film could have been ready for global release by 1 July 2007.
99.	That brings me to the various points raised by Mr Hobbs.
100.	Mr Hobbs put to Mr McDermott, and he accepted, that certain clearances from individual performers (other than Jimi Hendrix and the other members of The Jimi Hendrix Experience) whose work was to be included as part of the Project as released would be necessary but had not been obtained by September 2006 (and had still not been obtained by the time of the trial before me) and that clearances were also needed in respect of one or more of the compositions.   Mr McDermott did not think that obtaining the clearances would be a problem and that, in the case of performance rights, the performances in question could simply have been excluded from the film if there had been a problem.   As to clearances in respect of compositions, he had not encountered difficulties in obtaining them in the past.  
101.	I accept Mr McDermott’s evidence in this respect.  I consider therefore that any necessary clearances would have been obtained and that, if they were not forthcoming, the performance or particular composition could simply have been excluded from the film as released.   The fact that exploitation of third party rights would be likely to result in income for that third party gives added support to this conclusion: the third party would have every incentive to reach an agreement with the claimants in the knowledge that his performance could easily be excluded and that some income is better than none.   I do not therefore consider that the need for clearances would have held up the progress of the Project.
102.	A more serious obstacle to the commercial exploitation of the completed film and accompanying DVDs and CDs was the adverse copyright registration filed by Ms Laura Pearson and Mr Steve Gold.   Its removal by the second claimant and Mr Goldstein was a term of the agreement of 16 March 2010 settling the dispute between the claimants over the ownership of the copyright in the Recordings.   It appears that the adverse registration had been made as long ago as December 1997 and had therefore lain unchallenged for many years.   It was accepted by the claimants that its existence needed to be resolved and that any distributor would so require before the film could be released.
103.	I am doubtful whether the registration had any justification: from the documents I have seen it is difficult to see what interest Mr Gold could have had from and after 2 September 1969 (when copyright in the Recordings appears to have passed to a company called GHG Enterprises Inc trading as Entertainment International) and certainly from and after January 1974 when copyright in the same material appears to have been assigned to the second claimant, let alone any to which Ms Pearson could legitimately lay claim.
104.	But in any event, the reality was, as Mr Goldstein stated (and I accept) that the claimants would, if required, have warranted ownership of the necessary interest in the Recordings and agreed to indemnify the distributor (and any others potentially affected) against breach.   See in this context the observations of Arnold J in The Codemasters Software Co Ltd v Automobile Club De L’Ouest [2009] EWHC 2361 (Pat) at [25] to [26].   The agreement between TCP and the defendant contained provision to like effect in relation to title to the covermount contents. 
105.	I do not therefore consider that the existence of the adverse copyright registration posed an insurmountable obstacle to the commercial exploitation of the RAH material.  
106.	Until early 2007 and again shortly in 2009 the second claimant was suspended from the register of companies of its US state of incorporation.  Lifting the suspension was easily obtained (apparently by the payment of outstanding fees).   I am not therefore persuaded that suspension would have presented any significant obstacle to the launch of the Project in mid-2007 (or at any other time).
107.	Nor do I consider, to take another of the objections mentioned by Mr Hobbs, that the fact that the claimants were in dispute over the beneficial ownership of the copyright in the Recordings presented any kind of real obstacle to the launch of the Project.   Indeed, it was not altogether clear whether the existence of this dispute was being urged by Mr Hobbs as an obstacle of any significance.    It was accepted by both Mr McDermott and Mr Goldstein that a settlement of the dispute was a necessary pre-condition to the exploitation of the RAH material.    And when, on signing a distribution agreement with Sony in March 2010 (see below), it was necessary to reach such a settlement, the claimants were able to sort out their differences: they entered into the agreement to do so on 16 March 2010.   Moreover, to the extent that they needed to agree matters in order to proceed with the Project, and their claims against the defendant, the two claimants were able to do so.   Thus, the agreement which they reached on 21 January 2007.
108.	This brings me to the question of the distributor for the film.   It was in practical terms essential, as the claimants acknowledged, that they secure a distribution agreement.   And in the event they did so by entering into an agreement with Sony on or about 17 March 2010 (taking effect as of 1 March 2010) as the trial before me began.    The agreement, which I will return to later, provides for Sony Music to have the distribution rights in respect both of the feature-length film and of the accompanying DVDs and CDs.  It envisages a launch of the film on or around 18 September 2010 which will be the 40th anniversary of Jimi Hendrix’s death.  Sony’s initial offer letter was dated 23 July 2009 but only resulted in a concluded deal nearly nine months later, in March 2010.   The fact that it took so many months to reach a signed agreement was much debated in the cross-examination of Mr McDermott and Mr Goldstein.   The gist of their evidence on this was that, if it had been necessary to conclude a distributorship agreement with Sony at an earlier date, the parties could and would have done so.   But, they said, there was no pressure to come to a final agreement following their acceptance of Sony’s offer letter of 23 July 2009 with the result that the time actually taken was not reflective of the time needed to agree the matters that needed to be agreed.  Mr Orr, moreover, was of the view that deals with distributors can be achieved very quickly.   
109.	The conclusion I draw from the evidence on this matter is that, if circumstances had required it, a deal with a distributor (whether Sony or Universal or some other entity) could have been achieved far more speedily than the time it took to conclude the agreement with Sony which resulted in the agreement of March 2010.
110.	The question which I have to ask myself, however, is not how quickly an agreement with Sony Music could have been reached and, by the same token, how quickly the film and other materials could have been brought to a state of readiness for release, if there had been no covermount distribution by the defendant but by when realistically such an agreement would have been reached and, having secured such agreement, how long thereafter it would have taken to progress the matter to a release? 
111.	On this, one thing at least seems clear.   That is that the progress towards bringing the Project to fulfilment had been fairly leisurely up to September 2006.   I certainly detected no sense of urgency about it.   In his latest witness statement Mr McDermott suggested that the claimants were aiming to screen the film to potential distributors at the Sundance Festival (in Utah) in January 2007 to be followed by a premiere at the Cannes Film Festival in the second half of May 2007 with a view to a release of the completed film globally towards the end of June or the beginning of July preceded by the global release of the CD soundtrack six or so weeks earlier.   Hence the date which Mr Jones submitted should be taken as the appropriate date for the release but for the covermount, namely 1 July 2007.
112.	I doubt very much whether these were the claimants’ settled intentions at the time.   There is no mention of these two festivals as representing target events in the development of the project in either the particulars of claim or, more importantly, in the initial (and lengthy) witness statements of Mr McDermott and Mr Goldstein or in response to the requirements of an order of the court for further information made on 16 February 2009.   
113.	The first reference to the festivals appears in Mr McDermott’s further witness statement of 16 February 2010.  In paragraph 75 of that statement he said that:
“We were considering premiering the film at the Sundance Film Festival (held on 18 to 28 January 2007) ...”
He then referred to what he described as “the alternative, which was the favoured option of ...Endeavor”, namely “to premiere the film at the Cannes Film Festival ... with a view to releasing the film globally in perhaps late June/early July 2007...”
114.	The reference to these festivals received no explicit mention in any of Mr Goldstein’s five witness statements.  In Mr McGuire’s witness statement (of 15 February 2010) there was reference to consideration having been given to “whether to premiere the film at the Sundance Film Festival ... or instead at the Cannes Film Festival... our preference was for the latter ...”   But this was qualified by Mr McDermott’s sixth (and last) witness statement, signed on 22 March 2010 (during the trial) in which he corrected what he had said in his fourth witness statement:
“Our intention was to screen the film to potential distributors at the Sundance Festival in January.   It wasn't going to be premiered there (where I state that in paragraph 75 of my fourth statement, it is incorrect), or entered into competition ...”
115.	I was left with the impression that the claimants had no very definite plans for exactly how they would progress the Project beyond a general intention to proceed with it.  In his closing submissions, Mr Jones conceded that mention of earlier dates for the film’s release (for example, “Q1/Q2 of 2007” referred to in Mr McDermott’s fourth witness statement) or in Eversheds’ letter of 8 September (I presume on instructions from the first claimant) of March 2007 could not be realistically maintained.   Instead the claimants’ case was that, but for the covermount, the Project would have been launched at the beginning of July 2007.
116.	Given the leisurely pace at which the distribution agreement with Sony was negotiated, and, now that that agreement is in place, the six-month timetable for formal release of the film set by that agreement coupled with the evident lack of any urgency in the progress of the Project to September 2006, I am of the view that if there had been no infringing covermount, the earliest likely date for the release to the public of the film and accompanying CDs and DVDs would have been September 2007.   It could well have been later.   I do not consider that it would have occurred as early as July 2007.   I am encouraged to think that it would not have been earlier than September 2007 by the fact that, in the event and despite the claimants saying at any earlier stage of these proceedings that the postponed launch would take place in the third quarter of 2009, the fact is that at the time of the trial before me no date had been fixed for the launch.   Once more, the impression I have is of a lack of any real urgency in the pursuit of this venture.
Delay to the launch caused by the covermount distribution
117.	This issue goes to the heart of the claim to damages.   If the claimants are to be compensated in damages for losses they have suffered rather than by the payment of a notional licence fee (an issue I come to shortly) the longer the delay the greater the claim.  This is because the claimants have contended that the Project promised huge profits so that any delay means, at the very least, a delay in receiving those profits and therefore a loss to them.
118.	Mr Jones invited me to proceed on the footing that the delayed launch should be taken as having occurred in July 2009, being two years after what (as mentioned earlier) he submitted would have been the date of the launch if there had been no covermount distribution.   He accepted that any greater delay beyond July 2009 should not be laid at the defendant’s door.   I was told, but I do not need to decide, that the further delay in the launch of the Project has been as a result of the global financial crisis.   The fact is that the claimants do not suggest that any delay arising from that source should be attributable to the covermount distribution.   
119.	The period of two years of delay was derived, as I understood it, from the opinions expressed on the matter by Mr McDermott and Mr Goldstein in the courses of their oral evidence.   It is necessary, however, to examine carefully just what their evidence was and to evaluate whether it can fairly be said that the delay for which the claimants do make a claim is attributable to the covermount distribution.   
120.	I have earlier identified two reasons for the claimants’ action in suspending the Project’s launch: first, a wish to obtain a declaratory judgment to the effect that Charly had no right to license the use of any of the RAH material and, second, a wish to allow time to pass to enable the adverse effect on the UK market of the free distribution (by the covermount) of the 1.3 million inferior quality recordings from the RAH Concert to be dissipated.  See paragraph 89 above.
121.	As to the first of those reasons, I am of the view that, having regard to scale of the covermount distribution and the amount of money at stake in the Project’s launch, it was reasonable for the claimants to await the court’s decision on this important issue before proceeding to a launch.  In particular, I accept the claimants’ evidence that the scale of the distribution was altogether different from and greater than the scale of the piecemeal distribution of bootlegged recordings of the RAH Concert previously available on the market and was something which on this occasion they could not simply ignore.
122.	By 19 February 2008 the claimants had obtained the declaratory relief which they were seeking: they had established as against the defendant that between them they were entitled to the performer’s rights in the Performances and to copyright in the Recordings.   Indeed, it was fairly obvious at the earlier hearing before Warren J in December 2007 that the claimants would succeed in establishing liability against the defendant: the application was only adjourned at the defendant’s belated request to enable further evidence to be adduced in the hope that it might establish a triable defence; failing that, the claimants would have succeeded then and there.  In the event the formal order setting out the declaratory and other relief was not drawn up until 11 March as there remained an issue on costs which the court was asked to deal with.   The claimants had not obtained any relief against Charly but that was because, as a matter of deliberate policy, the claimants had chosen not to pursue Charly direct.
123.	In so far therefore as the suspension of the Project was for the first of the two reasons identified above, there was, certainly after 19 February 2008 and arguably by the conclusion of the December hearing, no further obstacle to the launch of the Project.   Thereafter, subject only to the second of the two reasons for the suspension, there were no grounds for the claimants failing to proceed to a launch.   If they had proceeded with reasonable diligence to complete the film (if still incomplete by then) and sign up to a distributorship agreement to bring the Project to its public launch as, in the discharge of their duty to mitigate their losses, they were obliged to do (rather than in the somewhat leisurely way that they had pursued the Project prior to September 2006), I see no reason why a launch could not have been achieved by September 2008.   That would have represented a delay of no more than 12 months from the date when, but for the defendant’s covermount, the launch would have occurred.   See paragraph 116 above.
124.	This brings me to the second of the two reasons for the suspension: the need to allow the UK market to settle following the distribution on to it of 1.3 million inferior quality recordings from the RAH Concert.   Mr McDermott’s evidence about this was as follows: 
“Q.  	I am now going to take you back to September 2006, and I am going to put before you a hypothetical situation, which is this: assume a week after the infringement the Sunday Times had come forward and said, "We got it wrong, we are happy to agree that we had no valid licence".  What in those circumstances would you have done with the RAH project?
A.  	We still had to, you know, stop and allow the market to cure of the material that had been released.  We had to look and consider what had happened there.  We also had to allow us to restart and clear this situation so that we could go to the parties that we had planned to go to, create opportunities for sponsorship and marketing.   So it would be -- it would certainly be something I don't feel we could have done.
Q.  	What do you mean when you use the term "clear"?  That you need to -- 
A.  	Cure the market?
SIR WILLIAM BLACKBURNE:  Let the market cure.
MR JONES:  Yes, my fault.
A.  	Well, there had been this widespread distribution of this material, and we were certainly, as I have testified, its substandard quality was a significant issue for us, given that, without Jimi Hendrix here to promote this film, we -- our goal, our effort that we had spent many years and much money on, was creating the most pristine presentation of this very significant opportunity.  That was the issue for us.  What had happened changed that for us in the sense that we had to cure the market of this confusion, potential confusion that consumers would have with this inferior material.
SIR WILLIAM BLACKBURNE:  At that stage you envisaged, what period as the likely period of cure?
A.  	At that time, you know, we really had to, as I testified earlier, measure the impact that, you know, if we are looking at it, as Mr Jones asked, a week later, it was difficult at that time to know what we were looking at.   We also had to, you know, consider the effort we would now need to make on behalf of taking legal action.  So that in turn was something that factored into our --
SIR WILLIAM BLACKBURNE:  My understanding is that by 30 September you had considered, along with Mr Goldstein, the position sufficiently to come to the view that the project must be put on hold at that stage.
A.  	Yes.
SIR WILLIAM BLACKBURNE:  So that presumably was after you had assessed the impact of what had happened?
A.  	Yes.
SIR WILLIAM BLACKBURNE:  At that stage, how long did you think it would take for the market to cure, to be cured of, if you like, the poison -- I think that is essentially what you are saying -- which had been spread by this covermount?
A.  	Well, our original intention was to release the film in 2007, but in light of what had happened, we really needed to wait until the situation resolved before we felt we could go forward.  At that time, it ultimately became 2008, but we definitely felt that we needed to wait to see what transpired with the legal effort before we could go forward.  It was a part of that thinking.
SIR WILLIAM BLACKBURNE:  Supposing, to take Mr Jones's example, the Sunday Times had come along and said, "We got it wrong".  You have just told me that you would still have had to put a hold on the project to let the market cure.  Supposing the Sunday Times at that stage said, "Okay, we got it wrong, we hold our hands up", how long do you say it would have taken for the market to cure?  Looking back now, taking the magic carpet that Mr Hobbs suggested that you should take, back to September 2006, what are we talking about?  One year?   18 months?  Five years?
A.  	No, I would think -- I would certainly think in the time period of approximately 18 months.
SIR WILLIAM BLACKBURNE:  18 months to clear, from September 2006?
A.  	Well, our original plan was to premiere the film in January, so, yeah.  So maybe 18 to 24, depending on when it ultimately would have all transpired.”
125.	Mr Goldstein, who gave evidence after Mr McDermott, said this on the matter:
“Q.  	I am going to put a hypothetical question to you, same one I put to Mr McDermott.  We know that the Sunday Times issued the infringing CDs on Sunday, 10 September.  Now, assume in the week following the Sunday Times had accepted that they had infringed your rights and they were willing to agree a declaration of infringement, what effect would that have had on the project?”
A.  	As far as the release of the project, we would still have to wait at least a couple of years to three years until the debris cleared from the catastrophe that they put upon us.
Q.  	You've said three years, any reason why you've picked three years?
SIR WILLIAM BLACKBURNE:  He said two to three years.
MR JONES:  I didn't hear the two, I am sorry.
A.  	Two to three years.  At least two years.
MR JONES:  I am sorry, I didn't hear that.
A.  	In our estimate.  So everybody can forget it ever happened, so when we come out again it's not a recent memory, it's in the past and it is kind of like all new again and we can just set it up again and go again.
Q.  	Why did you not go ahead in the rest of the world and simply let the UK wait for the two to three years?
A.  	Well, it's a world project and our sponsors for the most part will be world sponsors.  We've -- we promised them a world release, they'd have the exclusive in their particular area, you know, in their area of sponsorship.   I mean, England is 20 per cent of the world, that's 20 per cent of our income.  A major thrust of the promotion was happening in England.  We were going to do a world premier here, at Albert Hall, a big memorial concert, a big, you know, concert where everyone was playing Jimi Hendrix tunes.   I mean, this was the focal point, and as I said before -- and maybe I shouldn't have -- we are going to take the two halves of the guitar and put it together, do a big publicity, gaining those two parts, and one of our sponsors will pay £1 million for that.   The whole thrust of the beginning of the campaign to set this film up was in England.  The film was shot in England, at Albert Hall.  I mean, not having that venue and not having that ability really dismantled us.”
126.	So, in the view of these two persons the spread of time to “cure” the UK market so that “the debris cleared from the catastrophe” was between 18 and 24 months in the opinion of one and between 24 and 36 months in the opinion of the other, with time measured, in each case, as I followed the evidence, from the date of the offending covermount in September 2006.  Taking Mr McDermott’s longest period and Mr Goldstein’s shortest, ie 24 months (I see no reason why I should take a longer period than Mr McDermott suggested), means that the ill effects of the covermount distribution would have been dissipated by September 2008.   On the claimants’ own evidence therefore there is no reason why the launch should have been delayed beyond that time by reason of any damage to the market caused by the covermount.
127.	But that assumes that the UK market was damaged in the way that Mr McDermott and Mr Goldstein suggested.   I am very far from persuaded that it was.   What was so striking is that there was no evidence of any complaints to the first claimant, the zealous guardian worldwide of the Jimi Hendrix musical legacy, by any recipient of the CD or by any Jimi Hendrix enthusiasts.   There was not one single document commenting in any way on the fact or impact of the covermount distribution, either between the claimants and their associates in the Project or in communications between the two claimants.   There was nothing.   Instead, the court was left simply with the say-so of Mr McDermott and Mr Goldstein that the appearance of the covermount was the disaster to which they referred in the passages from their evidence set out above.  To be fair to them they had some support for their decision to suspend the Project in the witness statement of Mr McGuire (“Although I was not a party to the decision to suspend the project, I would certainly have agreed at the time that it was the right decision.”) The trouble with Mr McGuire’s view is that, as he states, he was not involved in the decision to suspend and, as his cross-examination established, he only heard of the covermount many months after the event.
128.	It is not as if this is an issue which was incapable of objective evidence and could only depend on the say-so of the main participants.  Thus, it might have been possible to evaluate whether the poor quality of the covermount had any effect on the British public’s interest in Jimi Hendrix’s music if the claimants had taken steps to measure its impact on, for example, CD sales of Jimi Hendrix back catalogue numbers or by undertaking some other form of market research.  But there was none.   Indeed, this was a matter noted by Richard Boulton, the claimants’ own forensic accountancy expert: see paragraph 2.68 of his first report.   
129.	To this is to be added the fact that, as Mr Hobbs emphasised in his cross-examination of Mr McDermott and Mr Goldstein and in his closing submissions, the four-track recordings which, with the film of the Concert, were to form the basis of the launch were in an altogether different league, in terms of quality, from the bootlegged recordings that featured in the covermount.   It is, to my mind, difficult to grasp why members of the public, otherwise interested in Jimi Hendrix and his music and performance skills, and in particular in the RAH Concert, should be deterred from seeing the feature film or from acquiring a DVD or CD of the concert merely because of the random appearance on the UK market of the inferior quality covermount recordings of a few of the songs performed at it.   (The covermount CD, which I have listened to, lasts under 60 minutes.)  Not the least of the reasons for doubting the supposed impact on the UK market of the covermount is the fact, as already pointed out, that, over the years, other bootlegged recordings of the concert have made their way on to the market and have attracted a small but steady number of purchasers.  This has not deterred the claimants from proceeding with the Project.   And rightly so.
130.	In doubting whether the covermount had the dire effect to which Mr McDermott and Mr Goldstein testified, I do not need to go along with the independent expert evidence of Ms Harris (to whom I referred earlier) that “covermount promotions do not adversely affect sales or the artist’s material ... Sales increase as the result of a covermount promotion which is why the music industry continues to use covermounts to promote artists”.   Much less do I need to accept her view that “...the Jimi Hendrix covermount should have provided the ideal backdrop to the RAH Project ...The covermount would have been an ideal introduction to the RAH Project and the distribution of the covermount would have provided the perfect opportunity to launch the RAH Project, not to suspend it.”   In any event the difficulty about Ms Harris’s evidence was that the covermount examples to which she referred had, almost without exception, taken place by arrangement with the artist involved and the tracks on the covermounts were not poor quality bootlegged recordings.   None of her examples, as it seemed to me, provided a convincing comparator to the circumstances of the Jimi Hendrix covermount.   
131.	I do not need to explore this matter further because it follows from the first of the reasons given for the suspension - the need to establish that Charly had no right to license use of the RAH material - that a suspension of the Project was justified in any event to the very date, September 2008, when, if there had been the damage to the UK market to which Mr McDermott and Mr Goldstein referred, that damage would have disappeared.
The nature and scope of the claimants’ compensation
132.	In considering what compensation the claimants should recover for the consequences of the breaches of their rights, it is necessary to deal with two anterior issues: first, the form that the compensation should take (is it damages for the losses that the claimants can show that they suffered as a result of 12 months of delay to the launch of the Project or should it take the form of a notional licence fee?) and, second, whether in any event the compensation is limited to the effect of the breaches of right within the territorial jurisdiction of the United Kingdom and should not extend extraterritorially.  It is to those two issues that I now come. 
Damages or a notional licence?
133.	Section 96 (in the case of copyright) and section 191I (in the case of performer’s rights) of the 1988 Act provide for the payment of damages (among other remedies) in actions for infringement of the right in question. Ordinary principles of law apply to their assessment.
134.	In General Tire & Rubber Co. v Firestone Tyre & Rubber Co. Ltd. [1975] 1WLR 819 the House of Lords considered the assessment of damages for patent infringement. Lord Wilberforce (at 824 to 827) identified three different approaches to damages recovery.  Which approach is to be adopted depends on the way in which the patentee intends to exploit his patent. The third of the three approaches caters for the case where the patentee has no present intention of exploiting his patent.  The same approaches apply to other intellectual property rights, in particular, cases of copyright infringement and infringement of performer’s rights.  The overall position has been accurately summarised in Arnold, Performer’s Rights, 4th edition (2008), at para 6.22:
“In the case of performers’ property rights, as with copyright, the measure of damages is assessed on the basis that the defendant has invaded the claimant’s property.  Accordingly, the measure of damages for infringement of these rights depends on whether the owner of the rights exploits his property, and if so how.  If the owner exploits his property by making and selling recordings of the performances, then he will be compensated for any loss sustained by this business subject to the normal rules of causation and remoteness.  If the owner exploits his property by licensing it, then prima facie the owner has merely lost an opportunity to grant a licence and the damages will be assessed at his normal royalty rate, although an increase may be awarded.  If the owner does not exploit his property, a reasonable royalty for the use made of the property by the infringer will be awarded assessed on the basis of a hypothetical transaction between a willing licensor and a willing licensee.”
If, therefore, the claimant makes and sells copies of recordings it is necessary, in order to put him in the position he would have been in if there had been no infringement, to compensate him for his inability to sell recordings, or as many recordings, as he would have done but for the breach.  I call this the “loss sustained approach”.  If the claimant merely licenses his rights, he is entitled to be put in the position he would have been in if a licence had been requested of him. He can expect to be compensated accordingly.  It is only where the claimant does not exploit his rights commercially and where therefore it would not be possible to say what sum the claimant would have requested from the defendant that the court is thrown back on assessing the damage on the basis of a hypothetical transaction between a willing licensor and a willing licensee.  This is likely to be so even if the claimant says that, if asked, he would not have been willing to enter into the transaction hypothesised.  I call this the “notional licence approach”.
135.	Article 13(1) of the Directive – where it applies – requires the court to order the infringer to pay the injured party damages “appropriate to the actual prejudice suffered by him/her as a result of the infringement”.  It requires the court, when undertaking this task, either to “take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered…” (in short, the loss sustained approach) or “in appropriate cases” to fix loss by reference to “elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question” (in short the notional licence approach).
136.	Mr Jones submitted that this was a case where damages should be assessed on the basis of the loss sustained approach.  Mr Hobbs submitted that if the claimants established any right to be compensated at all their damages should be by reference to the notional licence approach.
137.	I am of the clear view that the loss sustained approach is the correct way of assessing the claimants’ damages.  This is not only because, as Mr Jones submitted, the claimants were engaged in a joint venture to exploit the Recordings and the Performances through the RAH project, the further fulfilment of which was (as I have held) suspended as a direct result of the distribution of the defendant’s covermount CDs, but also because, as became increasingly apparent as the matter was explored in evidence and submission, the notional licence approach faces formidable difficulties.  It would require the court to assess what would have been a reasonable licence fee to permit the defendant to make and distribute a vast number of CDs containing very poor quality, illicitly obtained recordings which the claimants, as I accept, would never have permitted, not least because to do so would have upset their own plans for the exploitation of the RAH material.  Quite how these matters were to be reflected in the notional licence fee was never satisfactorily explained. 
138.	My assessment of the claimants’ losses proceeds therefore on the footing that, if causation is established, they are to be measured on the loss sustained approach.  It is by reference to sub-paragraph (a) and not sub-paragraph (b) of article 13 of the Directive that the compensation falls to be determined.  This conclusion avoids the need to consider and come to a view on the amount of a notional licence fee, an issue on which there was a considerable evidence and detailed argument. 
Extraterritoriality
139.	The claimants seek to be compensated for damage suffered on a worldwide basis, as a result of the delay in the launch of the Project.
140.	Mr Hobbs submitted that, if they can otherwise show that the defendant’s infringing activity caused them loss, the claimants are limited to damages in respect of loss suffered within the territorial limits of the UK.  He submitted that the rights in play – the sound recording rights and the performer’s rights – being entirely the creatures of statute are exclusively located within, and are therefore confined to, those territorial limits.  It was not open to the claimants to recover damages in this jurisdiction for any loss of profitability in respect of an overseas copyright.  He took as an example the fact that the covermount CDs had been distributed with sales of The Sunday Times in the Republic of Ireland, as well as in the UK.  The claimants, he said, were disabled from recovering in this jurisdiction any damages for the infringement of their Irish copyright.  The test for recoverability of economic loss is, he said, economic detriment to and in respect of the protected asset, namely the UK recording copyright and the UK performer’s rights.  They are not what he termed “globalised assets”; it was not open to the claimants to recover damages as if what was protected had a worldwide spread.  In reality, he said, the claimants were claiming damages for losses in respect of an agglomeration of rights in that the RAH project had built into it a series of layered rights, including other persons’ rights in the sound recordings and performances, each of which was distinct in the many jurisdictions covered by the project.  It was not open to the claimants to seek recovery in this jurisdiction in respect of such an agglomeration of rights with such a global spread.  No authority, he said, had been cited to justify such a claim. 
141.	The claimants accepted that it is not open to them to claim in this jurisdiction for losses caused by the infringement of any overseas copyright or performer’s right (or their equivalents).  They accepted, to take the particular example mentioned by Mr Hobbs, that they cannot claim in this jurisdiction for losses exclusively caused by the infringement of their Irish rights even though, as it happens, covermount CDs were distributed in the Republic.  They accepted that they would have to proceed in the Republic to do so.  The critical distinction, they said, is between seeking recovery in this jurisdiction for the economic consequences, both here and abroad, of the infringement of their UK rights (the UK protected assets as Mr Hobbs described them) on the one hand and seeking recovery in this jurisdiction for the economic consequences of the defendant’s infringement of any extraterritorially based rights on the other.  Mr Jones emphasised that they do not seek to do the latter. It was, he said, simply an issue of causation: they claim that, as a consequence of the defendant’s infringement in the UK of their UK rights, they have lost profits they would otherwise have made from exploiting the RAH material here and abroad.  This is primarily because of the delay to the launch of the project caused by the infringement.  Ultimately, he said, the question turns on causation: were the losses for which they claim suffered as a result of the infringement of their UK rights.  The fact that the losses might also be recoverable by infringement proceedings in respect of some overseas right brought in the jurisdiction where that overseas right is based is coincidental.  But such an independent right would be subject to the limiting principle (assuming the law in such jurisdiction were the same as in this jurisdiction) that enables a claimant to recover once only for the same loss, no matter how many separate causes of action may exist for that loss.  In short, he submitted, the defendant is confusing the limits of the protection afforded by the 1988 Act to infringements that take place in the UK with the recoverability in the UK of the consequential worldwide losses suffered as a result of the infringement in the UK of the claimants’ UK rights. 
142.	In my judgment, Mr Jones is correct in this.  For all I know, there may not exist in some of the jurisdictions covered by the claims any rights equivalent to the UK rights on which the claimants base their claims in this jurisdiction.  Whether or not such overseas rights exist is immaterial to the recoverability in principle of the losses which the claimants say were caused by the defendant’s infringement of their UK protected assets.  Authority does not assist on so basic a point and none was cited to me which dealt even inferentially with the matter.  Certainly, Mr Jones felt no need to cite authority for the proposition, which I did not understand Mr Hobbs to dispute, that a claim justiciable before the courts of this jurisdiction can result in the recovery of damages suffered outside the jurisdiction if the claimant can show that the loss in question was caused by the defendant’s wrongdoing (subject always to the limiting principles of remoteness and the like).  In particular, my attention was not drawn to any authority which indicated that damages for infringement of copyright or of performer’s rights are limited to damage suffered within the territorial jurisdiction of this court.  The 1988 Act would need to make plain that this was the case if so serious a limitation on recoverability of damages were intended.  I was shown nothing in the 1988 Act to justify such a limitation.
The quantum of loss
(a)  Some general comments
143.	The great problem which I have experienced in assessing what if any damage was caused to the claimants by a year's delay in the launch of the Project has been the sheer paucity of material to support the damages claimed.   I will expand upon that later.   For the moment, I focus upon two particular difficulties.   
144.	The first is that I am asked to compare how the Project would have fared if there had been no covermount distribution with how it would have fared if it had been launched once the effects of the covermount distribution had been allowed to dissipate and the claimants had had an opportunity to establish that the defendant had no licence to use the materials contained in the covermount CD.   As I have explained, the claimants suggested that the latter date should be taken as July 2009 but I have found that it should be taken as September 2008.   But the fact is that even now, 2010, the launch is still awaited.   So there is no actual comparator in terms of what success the Project has actually achieved.  I have therefore no means of gauging - albeit by reference to some later date - how popular the film and accompanying DVDs and CDs and other merchandising have proved to be and no materials by way of box-office receipts and sales data to which adjustments could be made to enable a view to be expressed of the success of the Project if it had been launched on some earlier date or dates.  
145.	What is more, no-one who gave evidence before me, except Mr McDermott and Mr Goldstein (and I assume Mr Johnston), certainly none of the independent experts, had seen any of the Performances (or any of the other footage) or listened to the Recordings (or any of the other four-track recordings), let alone the intended film (in whatever state).  There is therefore scant basis in the expert evidence for seeking to identify some alternative comparator in other films or like material.   
146.	In a field as subjective and unpredictable as the film and music industry forecasting the success of a feature film and its accompanying materials (DVDs, CDs, ringtones, downloads and merchandising of various kinds) is a fool’s game.   What to one man is a guaranteed box-office blockbuster is to another a certain box office loser.   The more so, as it seems to me, where the film is of an event - a live concert - which took place 40 years ago since when, even allowing for dedicated Hendrix devotees and Jimi Hendrix’s iconic status in the popular music world and the excellence of his performance at the Concert, musical tastes have inevitably moved on.
147.	The other difficulty which has served only to heighten the first, has been that the two claimants are not themselves agreed about how the Project will fare.   Unsurprisingly, they both predict a box-office success.   But they diverge sharply over the degree of that success.  In paragraph 48 of his first witness statement Mr McDermott, acknowledging that the second claimant’s revenue projections were higher than his, accepted that “there is, of course, no science to making such projections” and that the second claimant’s views “may be equally valid.” He then added that “[a]t this stage it is only a matter of informed opinion as both figures are inevitably speculative.  There is no right or wrong answer”. 
148.	Following analysis of the estimated profit projection produced by the first claimant, Mr Richard Boulton of LECG Limited, the claimants’ forensic accountancy expert, estimated in his first report dated 12 January 2009 the claimants’ damages to be $6.9 million on the assumption that the launch was delayed 27 months (from 31 March 2007 to 1 July 2009), with interest up to 31 December 2008 of $1.7 million to be added.   Performing the same exercise and on the same assumption but basing himself on the profit prediction of the second claimant, the equivalent damages and interest figures reached by Mr Boulton were $12.5 million and $3.5 million respectively.   In his second report those figures (inclusive of interest) were increased to $9.8 million for Mr McDermott’s projection and $18.2 million for Mr Goldstein’s.  In effect, Mr Goldstein’s forecast was double that of Mr McDermott.   They cannot both be right.   And if one is wrong, why cannot both be?   The fact that they are so far apart has served only to undermine such confidence as I have been able to place in the reliability of either projection.
(b)  The claimants’ projections
149.	This second difficulty has been compounded by the manner in which the two divergent forecasts have been prepared and the almost total lack of supporting data.
150.	Mr McDermott’s projection on behalf of the first claimant appears on a single A4 sheet of paper divided between “International” and “North America” and further subdivided into items such as film, DVD, CD, DVD box set, CD box set, downloads, ringtones, television, co-operative advertising and merchandise.   A forecast of gross revenue from the film, DVDs and CDs is given, further broken down in the case of DVDs and CDs into estimates, to the nearest 50,000, of the number of units sold and the price per unit, from which a percentage deduction is made in respect of “distribution” resulting in a net revenue figure for each item.   Revenue from co-operative advertising and merchandise is simply stated to be 1.5 million in each case (US$ in the case of North America and € for the rest of the world).   The forecast was exhibited to Mr McDermott’s first witness statement.  The figures represented his estimate based (according to paragraph 45 of that witness statement) “on my knowledge and experience gained from working on previous Jimi Hendrix releases, whilst at the same time taking into account the unique nature of RAH project”.   His figures were said to represent the “initial 18-24 month period of sales from the date of initial release”.   (Mr Boulton in his workings assumed that they covered the first 24 months.)   Mr McDermott stated that his figures for DVDs and CDs etc were after deduction of various third party fees and royalties.   But no details were provided.  In paragraph 49, in a passage to which I attach importance, he stated that “...it is difficult, and indeed misleading, to compare the sales figures of other Jimi Hendrix ‘live’ releases...against the claimants’ projections for the RAH project.   This is because of the unique history of the performances and recordings from the RAH.”   In short, Mr McDermott was of the view that other Jimi Hendrix “live” releases provided no kind of reliable comparator.   
151.	Later in his first witness statement Mr McDermott assumed that the Project had “gone ahead as planned in Q1 2007”.   He then went on to say that “the Claimants believed that substantial sales of the RAH materials would be lost as a result of the availability of the Covermounts, in addition to those that would be lost and the damage caused as a result of the delay”.    He then expanded, but only a little, on his belief that sales would be lost as a result of the covermount distribution and identified one specific factor relevant to delay, namely the decline in recent years in what he described as “CD sales at traditional ‘bricks and mortar’ retail establishments... and on line” unmatched by the “increase in legal digital downloads”.
152.	That was effectively the sum total of the first claimant’s evidence at that stage in support of both claimants’ damages claim.   
153.	Mr Goldstein’s profit projection on behalf of the second claimant was no more illuminating.   Set out on a single spreadsheet, his figures do not distinguish between North America and the rest of the world: he approaches revenue globally.   He does so over a five year period starting in 2007.   He has the same breakdown of items as Mr McDermott except that he has “radio” as an additional source of revenue.   His figures are supplemented by four brief footnotes.  One relates to film revenue.  It explains that it is based on the film featuring the Rolling Stones called Shine a Light and that it would be shown on 1,500 screens worldwide.   It subsequently turned out that Mr Goldstein had understated the number of screens which his figures assumed: he said that there would be 3,000 world wide. After reading Mr Orr’s evidence he also accepted that his figure for net film income failed to take into account the exhibitors’ (i.e. the cinemas’) charges.   He therefore reduced his estimate of total net revenue over the five years from that source.  Another note attached to Mr Goldstein’s projection explained that in relation to DVD and CD sales an organisation called “Best Buy” was “negotiating” to guarantee “between $10m and $20m in the US”.   It turned out, however, that there was nothing in writing to back up this assertion.   I only had Mr Goldstein’s word for it.
154.	In his first witness statement, to which the projection was exhibited, Mr Goldstein stated that he had created the document with the assistance of the second claimant’s accountant (whom he named) and that “ [w]e have based our estimates on our commercial experience in the entertainment industry generally and of producing similar products...”    He noted that his figures were higher than the first claimant’s but added “... I should explain that I have conferred with Endeavor ... and they feel that my projections are reasonable”.   He, like Mr McDermott, cautioned against looking for supporting material in previous Jimi Hendrix live albums:    
“39.   It would be misleading to compare the sales figures of previous Jimi Hendrix live albums with the revenues we expect to receive from the RAH project.   For example, Jimi’s performance at the Woodstock Music Festival in August 1969 was, in my view, nowhere near the quality of the second concert at the Royal Albert Hall, either creatively and technically.   Jimi Hendrix was at his best when part of the original Jimi Hendrix Experience (in other words when playing alongside Noel Redding and Mitch Mitchell).   The band broke up in April 1969, after the RAH concerts and before Woodstock.   At Woodstock, the Isle of Wight and Berkeley, Jimi had different band members.  At times, in my opinion, the performances lacked the energy and cohesiveness of the original Jimi Hendrix Experience.   As such, I consider that no other visual and audio release of Jimi Hendrix comes even close to the performance at the Royal Albert Hall.”
155.	Faced with what was scarcely more than assertion in the claimants’ efforts to estimate their loss of profits, the defendant sought and obtained a wide-ranging order for the supply of further information and disclosure to elucidate the basis for the amounts claimed.   Dated 16 February 2009 the order required the claimants to provide the defendant by 2 March 2009 with “clarification of each of the figures” set out in the two revenue and profit projections.   The order required the claimants to explain how the figures were calculated and to identify all fact and matters relied upon.   In particular, it stated that:
“(a)	If reliance has been placed on industry norms for the monetary values and/or volumes of sales please provide proper particulars of the same;
(b)	If reliance has been placed on prices and/or volumes of sales of the previous Jimi Hendrix products please identify which products are relied upon and the date of their release; the prices achieved (and if different in different jurisdictions the prices in each such jurisdiction); and the volume of sales by jurisdiction;
(c)	In relation to each of the percentage figures for the distribution fee claimed if reliance has been placed on distribution agreements that the First and/or Second Claimant had previously entered into please identify the said agreement ...”
The order also called for the disclosure by the same date of, among others, documents or classes of documents in support of the calculations on which the figures set out in the revenue and profit projections had been based.
156.	The first claimant purported to comply with that order in the second witness statement of Mr McDermott, and the second claimant in the second witness statement of Mr Goldstein.
157.	Those further witness statements scarcely assist.   Mr McDermott stated that his estimate for gross income from the film was based on figures which “were very achievable rather than being a best case scenario” and that they were “based on my experience, market research and also talking to potential distributors either directly or through Endeavor”.   He referred to Shine a Light and another film.   As to DVDs, he based his unit price “on historical sales profits for Jimi Hendrix products plus an uplift to take into account the unique nature of the RAH material”.   There was no explanation of the size of the uplift.  Despite having previously stated that earlier “live” Jimi Hendrix releases provided no kind of comparator, Mr McDermott stated that “[t]he most directly comparable product is the DVD edition of Jimi Hendrix: Live at Woodstock released in 2005.  He referred to DVD releases by “other iconic rock artists” including Led Zepplin, the Rolling Stones and a Bob Dylan documentary.   But he accepted that none of these had been the subject of a cinema release.   For CDs, the most that Mr McDermott could offer was a reference to the Jimi Hendrix Experience box set released in 2000 and which had since sold approximately 500,000 units worldwide.  His projection of worldwide CD box set sales for the Project had been 500,000 unit sales in the 24 month period alone with which his figures dealt.   His projection of worldwide sales of CDs (as distinct from CD box sets) in the first 24 months was 700,000 units.   His second witness statement failed to shed any further light on that figure.  The same was true of his figure for downloads and ringtones; the former was based on “my experience of the market for new releases whose initial sales and marketing campaigns are driven by an association with a theatrical film”; the latter was based “on modelling from historic arrangements that Experience Hendrix has in place”.   No more particulars were divulged.   His figure for television was based “on entering into a ‘first window’ licence with ...”   Various broadcasters were then mentioned.   Insofar as any figures are mentioned they fall very short of the figures included in the projections for this source of revenue.   His explanation for the figures given for co-operative advertising and merchandising provide no explanation of how they had been reached.  His explanation for the distribution fee of 25% provided some but not much illumination.   It was  based on  Mr McDermott had negotiated for three earlier deals where the CD in question had been produced by the first claimant and then manufactured and distributed by a third party.   Practically no documentary support for any of these figures was provided.
158.	Mr Goldstein’s response on behalf of the second claimant to the order dated 16 February 2009 added very little to his earlier figures.   In paragraph 4 of his second witness statement, made in response to that order, Mr Goldstein stated that:
“...No distribution or sponsorship agreements were finalised by September 2006.   Therefore, in the absence of any confirmed financial guarantees, the most important factor in determining projected sales and revenue was my commercial experience and comparisons between our RAH project and sales of similar products (such as other soundtracks or other albums) relating to iconic artists.    In my view, the overall revenues set out in my projections are a reasonable and conservative projection of the money that would have been generated by the RAH project if it had been released in Q1/Q2 2007.   Subject to the contraction in the recorded music market since 2007, I expect my projections to be vindicated when the RAH project is released.”
He then dealt with each revenue head in his projections.   For film revenue he referred to the Rolling Stones’ Shine a Light released in 2008, the total gross worldwide income from which was stated by Mr Goldstein to be $15.7 million.  That figure is to be compared with Mr Goldstein’s expectation of gross income from the film of $25 million in 2007 alone (assuming that is the year of its release).   Mr Goldstein sought to explain away the discrepancy, by stating that the RAH material “has never been officially released...”   He referred also to the U2 film Rattle and Hum released in 1988 which, he said, had grossed $15 million worldwide.   Again, he sought to explain away the discrepancy on the basis that the RAH material had never before been released.   
159.	Mr Goldstein’s second witness statement shed no further light on his projections for DVD and CD sales (both individual and box sets), or on downloads, ringtones, TV and radio revenue, beyond repeating his earlier estimates and adding unspecific references to sales achieved by other iconic artists and how, for example, the soundtrack to the film The Bodyguard had sold around 42 million units worldwide.   His explanation for his projected figure for ringtone revenue (estimated at $900,000 over five years) is revealing for its lack of particularity:
“20.	At the date the schedule [ie his projection] was created it was too early for us to have had detailed discussions with companies in relation to ringtone deals.   However, as an example of the interest in the market place, I remember having a conversation with a representative from Nokia in 2008 in relation to downloading onto mobiles.   He said that he would be very interested in an exclusive deal and that such a deal would give us ‘a billion eyes’.   By this I took him to be referring to the number of people who have a Nokia phone and the exposure that would be given to the RAH project.
21.	The price for a ringtone is typically $2.99, of which we would expect to be paid $2.   There is no distribution fee shown in the projection schedule as we have put the price as $2...”
160.	Similarly unspecific is his explanation for the projected income of $15 million over five years from merchandising:
“24.	I expect merchandising to include everything from t-shirts, posters and badges to dolls of Jimi Hendrix.   Another company which I co-founded, The Visual Thing, did the merchandising for The Jimi Hendrix Experience’s tour.   As such, we have at our disposal an extensive archive of unpublished photographs which will be invaluable in our efforts.
25.	There are two alternative ways in which the merchandising could be done.   The first, as shown in the projections ... would be for us to do a direct deal with a merchandising company which would produce, market and sell products.   For such a deal I would expect us to have to pay around 50% of the sale price of the product to that company.   The price I have used in the projections is $10.   This is to reflect the average sale price of a piece of merchandise, for example, an RAH-themed t-shirt, and was done for the purpose of simplicity.   The units sold are 2,000,000.  This is an estimate based on how successful I expected the entire RAH project to be, particularly driven by the film release.”
He then described an alternative way of merchandising which adds nothing.
161.	On distribution fees, Mr Goldstein could say no more than that the 25% he had used was “based on what I consider to be an industry standard...” and that he believed it to be “a conservative estimate and that depending on the relevant product we would have been able to obtain distribution at a rate as low as 15%”.   He then referred to direct sales of DVDs and CDs through Wal-Mart, Best Buy “or others” where, he stated, there would be no distribution fee at all.   As with Mr McDermott, Mr Goldstein disclosed little in the way of relevant further documents to support his projection.
162.	The inadequacy of the claimants’ response to the order of 15 February 2009 led to a further wide-ranging order, this time dated 13 November 2009.   Made by consent this further order again required the claimants to provide clarification of each of the figures in the two projections.   It required particulars of revenue and expenses for each separate jurisdiction worldwide that was relied upon and particulars of the incidence of taxation affecting those figures.   It also required a breakdown between gross income and net income and between wholesale and retail prices.
163.	Mr McDermott’s response on behalf of the first claimant stated that he had not considered revenue jurisdiction by jurisdiction but had taken what he described as a “macro” approach, meaning that he had divided the world into two “target markets”, namely North America and the rest of the world.   He had given no separate consideration to sales in the UK.  He stated that the costs and expenses for the Project would be largely the same no matter how many jurisdictions there were.   He had not taken taxation into account.  He disclosed that in creating his projections he had drawn upon sales figures provided by Universal “as well as weekly Soundscan sales figures” as his reference for comparison.   (He had earlier, in his second witness statement, stated that much of the basis for providing his calculations had been “experience and comparison with other projects” in which he had been involved.)
164.	In his response on behalf of the second claimant, Mr Goldstein provided little further explanation for his projections beyond stating who had helped him produce them.   He disclosed that in creating his projection he “did not specifically rely upon previous sales of Jimi Hendrix material”. Rather, he stated, he took account of “all of the other factors” referred to in his witness statements.
165.	The result of all of this was a profoundly inadequate and unparticularised projection of revenue.   The overall impression was that the figures put forward in the two widely divergent projections had been based on personal estimate rather than by any process of reasoned analysis or comparison with past sales of Jimi Hendrix material.   What was conspicuously lacking was any detailed sales or box office data (except, at a later stage in their evidence, for some very limited Soundscan figures) and, in so far as reference had been made to other films or CDs featuring other “iconic” artists, no serious attempt was made to analyse the differences with a view to justifying the figures in the projections.  The general thrust of the evidence was that Mr McDermott and Mr Goldstein put themselves forward as having the experience and knowledge of the industry to estimate how the Project would fare and that it was unnecessary to condescend upon any serious analysis of how they had reached their very differing figures, let alone supply objective data to support them.  Indeed, in their written closing submissions, Mr Jones and Mr Cuddigan submitted that Mr McDermott and Mr Goldstein had approached their task “on a macro level” and that they had taken into account “their subjective appreciation of the particular artistic attributes and commercial strength” of the various elements of the Project.  Counsel submitted that provided I was satisfied that the estimates had been advanced honestly and subject to making allowances if necessary for the fact that the two witnesses might be “implicitly incentivised to be optimistic in those estimates by the effect high estimates might have on the damages award” (as it was delicately put) I should treat these two persons as “particularly expert” in the subject matter of the Project and its commercial prospects.  I was reminded that they had “years of experience in the entertainment industry, and had screened and played this material to scores of fellow professionals.”  That still left unanswered which of their two widely divergent forecasts I should prefer. Beyond hinting that perhaps it would be more realistic to follow the relatively more modest forecast of Mr McDermott, I was given no assistance on what it was about his forecast (except that it was in a smaller amount) that should persuade me to accept it.  
166.	But, of course, those two persons were not put forward and could not be put forward as independent experts, in effect in their own cause.   The claimants’ only expert was Mr Richard Boulton.   As I have mentioned, he was an expert in forensic accountancy.  It is to his evidence that I now turn.
167.	Before doing so, I state an important general conclusion which, if it was not made explicitly in the expert evidence, was certainly my understanding of it and in any event was not subject to any contrary suggestion in the evidence taken as a whole.  That conclusion is that, with the possible exception of the market for recorded music (essentially CDs and CD box sets), there is no reason to think that the box-office and other takings from the Project would be any different merely because it had been delayed by 12 months.  Indeed, it was not suggested that, subject to that same exception, it would have made any difference if the delay had been the 27 months for which the claimants contended.  Relevant to this is that it is not suggested that the effect of the global recession should be factored in to the figures: Mr Jones accepted that it should not.
168.	The question therefore, and the only question, is what, subject to allowing for the contraction in the market for recorded music during the period of the delay, the effect is of a year’s delay on the receipt of the same amount of revenue from the Project.  But to answer this it is necessary to reach a view on what that revenue is.  And therein lies the difficulty in this case.
(c)  The expert evidence
169.	Mr Boulton, who is highly qualified and had spent 20 years (until 2001) at Arthur Andersen, the last eleven of them as a partner, after which he had joined LECG becoming its managing director in 2007, could refer to a very considerable experience in music licensing as well as in other fields of intellectual property and patent valuation.   He was an impressive witness.
170.	Mr Boulton was able to assess what he described as “the key trends in the recorded music industry over the period in dispute” (effectively in the years up to 2007/2008).  By making various assumptions he concluded that overall US recorded music revenue declined at an average annual rate of 4% in 2006 and by 12% in 2007 and, by following the same approach, that the decline in the UK was 12% in 2006 and 15% in 2007. Viewing the position on a global basis he concluded that since September 2006 the global music market had declined at an annual rate of 13% whereas the global digital recorded music market had grown by 28%.  But the digital market was growing from a very much smaller base.   He next assessed the market for Jimi Hendrix records by reviewing unit sales and revenue generated by previous album releases. He concluded that the level of sales achieved by Jimi Hendrix releases in both CD and DVD formats continued to be strong and that between 2001 and 2007 worldwide sales of Jimi Hendrix CDs had been consistently at around one million with sales achieving a peak in the first to second year after release and then declining to a level point in subsequent years with sales being in the region of 14,000 to 74,000 annually depending on the popularity of the album.    But when it came to considering each claimant’s projection of the expected profit from the Project, he made clear that he was in no position to evaluate the reasonableness of their forecasts.   See paragraphs 4.23, 4.24, 4.26, 4.27 and 4.28 of his first report.   His expertise lay in analysing accounting and similar information and not in the subject matter of the Project.   Thus, in cross-examination, he disclaimed expertise “in the market for CDs or DVDs or theatrical films” saying that “there is an element of expertise around that that I do not think I address”.
171.	This was reinforced by following telling exchange which occurred in the course of his cross-examination by Mr Hobbs:
“Q. … I am actually asking you to define what your expertise is and where it ends relative to the RAH project?
A.  I have spent 29 years of my life performing work, from an accountancy training, in matters of finance and economics and since 1986 I have been involved in licensing, particularly in music licensing.
Q.  But not in relation to the RAH project expressed as a film project with supplementary DVD releases and CDs.   That is not within your experience or expertise is it?
A.  My experience of films is much more limited than my experience of CDs.
Q.  Can you give me a clearer answer to my question?  You are not claiming expertise in the licensing of film rights with associated DVD and CD exploitation, are you?
A.  No, my Lord, I don't think I am claiming that and I don't think I have been saying anything contrary to that.
Q.  Therefore you are not in a position to contradict, for example, the evidence that we heard yesterday that most theatrical releases run at a loss?  That is correct; you are not in a position to dispute that, are you?
A.  No.
Q.  Therefore you are not in a position to actually say how many advances remain unrecouped in the theatrical environment of a licensing agreement such as this, are you?
A.  No.” 
His calculation of the damages for which each claimant contended, resulting in the figures summarised earlier, was subject to that most important caveat: the core projections on which it was based were not ones within his area of expertise.   At best he could do no more than calculate what the claimants’ losses would be, assuming a delay of 27 months to the launch of the Project, on the basis that their figures were taken as the revenue which the Project would have earned if its launch had taken place on 31 March 2007.   
172.	In my judgment, the evidence tendered by the claimants, even when worked upon by Mr Boulton in his impressive first report, fell short, by a considerable margin, of the evidence needed to support the damages claimed.
173.	That brings me to the expert evidence called by the defendant.
174.	I have already referred to Ms Harris’s reports.   Her evidence went to the licensing of musical works in covermount CDs, the effect such covermounts have on sales of CDs by the artist whose work is the subject of the covermount, the level of fee paid for licensing copyright material for use in covermount CDs and what, in the instant case, a reasonable fee would have been for licensing the material contained in the covermount in issue in these proceedings.  For reasons which I have explained, I do not consider that damages are to be approached in this case on the footing of a licence of the material used.   Nor, as I have explained, do I consider that in the particular circumstances of this case Ms Harris’s opinion assisted on the effect of a covermount CD on the sales of CDs by the artist in question: here, the covermount CD consisted almost entirely of bootlegged and poorly recorded material from the RAH concert.   It was wholly without authorisation by those entitled in law to license it.
175.	The defendant called two other experts.   I deal first with Andrew Orr, to whom I have already briefly referred.  Mr Jones rightly accepted that he was “an honest and helpful witness, particularly in matters that fell squarely within the purview of his expertise.”  His expertise lay in the area of the sales, distribution and release of the independent theatrical film. He had worked in the past for, among others, Universal and was the managing director of a London-based production and international sales company.  He had been involved in the acquisition and international sales of over 50 independent feature films and clearly knew what he was talking about.  His expertise and independence impressed me. He was sharply critical of the profit predictions for the film made by both claimants.  Not only was he critical of the way that the claimants’ profit from the film had been computed (his criticism led to a significant downward revision of Mr Goldstein’s figures) but he doubted whether the film would make any profit at all.  “Generally speaking” he said “unless the film in question is a box office blockbuster, the theatrical release of a film is a loss leader with the majority of the revenue coming from DVD, TV and/or merchandising sales.”  He had no reason to think that the film of the RAH Concert would be in the blockbuster league and was critical of any attempt to draw any kind on analogy with a very recent live-performance film which had been a tremendous box office success, namely This is it, the Michael Jackson documentary. He described it as “a complete anomaly given the worldwide grief, hysteria and media coverage that surrounded Michael Jackson’s recent death.”  He was critical of the attempt to draw analogies with films such as Shine a Light and Rattle and Hum.   
176.	The defendant’s other expert was Gervase MacGregor who, like Mr Boulton, was an expert in forensic accounting. Mr MacGregor is a partner in BDO and head of its Advisory Services which handles forensic accounting, corporate finance, valuation and restructuring.   Like Mr Boulton, Mr MacGregor had an extremely impressive track record in the field of forensic accounting.  He was one of the two inspectors appointed by the Secretary of State to investigate the affairs of MG Rover and Phoenix and whose report was published in September 2009.  He too was an impressive witness although not so measured in his evidence as Mr Boulton.  Mr MacGregor produced two reports running (with attached documentation) to 736 pages, a little short of the 843 pages achieved by the three reports (with attached documentation) of Mr Boulton.  Following a without prejudice meeting the two of them produced a 35-page joint statement identifying their principal areas of agreement and disagreement. 
177.	Like Mr Boulton (and Mr Orr), Mr MacGregor had not viewed the film or any of the film footage or, according to their respective sources of information, listened to the covermount CD.   This is not a criticism: it merely serves to emphasise that the two accountancy experts were opining on the likely level of damages alleged to have been suffered by the claimants as a result of the delay to the Project (which has yet to see the light of day) without having seen any of the Performances or listened to any of the Recordings upon which the Project is based and without the assistance of independent experts who have expertise in film and musical appreciation and who might have been able to see and listen to what is likely to be on offer and express a view on it.
178.	Mr MacGregor summarised his findings by stating (1) that the claimants’ projections of the profits to be generated by the film and accompanying DVDs and CDs were not supported by documentary evidence and were unreasonably optimistic, (2) that he had seen insufficient evidence to enable him to conclude that any projections of revenue were reasonable in relation to ringtones, TV, radio and merchandising, (3) that the claimants’ assessment of loss did not take account of “mitigating revenue earned that would not otherwise have been earned” and (4) (dealing with a particular feature of Mr Bolton’s report) that the discount rate used by Mr Boulton in discounting future revenue to its current net present value was too high and calculated on the wrong basis. 
179.	But, having reached those conclusions, in particular the first two, and having offered in the body of his report good reasons for reaching them, Mr MacGregor then went on to make his own assessment of what, in his words, he considered to be “a reasonable projection of the worldwide profits that would be earned from the Royal Albert Hall project between 2006 and 2014”.   In short, he set out to perform the very task which the claimants, on whom the burden lay, had attempted but, in his view, had failed to carry out to any convincing degree.   He considered what the worldwide profits would be and concluded that “[a]fter taking into account mitigation… the loss to the Claimants resulting from the delay to the Project amounts (on a worldwide basis) to $710,786” (but uplifted to $784,729 on the assumption that the decline in the market for recorded music would affect sales of the Recordings) and that, as regards profit arising in the UK only, concluded the loss of profit to be $90,967 (or $114,120 on the likely assumption of a decline in the market for recorded music).   He assumed the same 27 month delay from March 2007 to September 2009 in the Project but, like Mr Boulton, took no account of the effects, if any, of taxation on the revenue and profits” from the Project.   Since the profits were in respect of a period spread over several years stretching into the future, he discounted them to calculate their net present value.   As his report was dated 18 January 2010, he made his assessment of the loss of profit as at 31 December 2009.   He applied a uniform interest rate (both as regards revenue arising prior to 2010 and arising in the future) at base rate plus 1%.   (Mr Boulton, by contrast, had applied a 13% rate to future payments.)
180.	Mr MacGregor’s calculation of revenue proceeded on the assumption that the likely revenue from a venture such as the Project “would bear some relationship to: (a) that artist’s other releases; and to (b) the success of other comparable musicians and other comparable releases”.  He noted, but disagreed with, Mr McDermott’s disavowal of the value of drawing any comparisons with other Jimi Hendrix “live” releases.
181.	In paragraphs 3.25 and 3.26 Mr MacGregor commented on his expertise:
“3.25	I have been a practicing accountant for over 25 years and have experience of a wide range of business sectors including the music industry, particularly but not exclusively in the field of royalty investigations.   I do not hold myself out to be an expert in marketing in the music industry and I am not, in the sections which follow, attempting to give a market view on success or otherwise of the Project.
3.26	What I am undertaking is an exercise well within my experience and expertise which is looking at projections, understanding the commercial rationale behind them and then attempting to see the extent to which underlying assumptions have some basis in commercial reality.   Where I do not have any market information to assist me I have stated this and made the point that I cannot comment further without further information.”
182.	Mr MacGregor then went on to identify a number of films featuring live performances by other artists that were released theatrically and, relying on publicly available sources, identified box-office figures and unit sales of DVDs of other “live” performances) by Jimi Hendrix and other artists. He did likewise in relation to CD sales (but in this case referring both to “live” and to “non-live” performances) by Jimi Hendrix and other artists.  He expressed the view at paragraph 5.10 that “the films of live performances by other artists listed are relevant comparators in considering the reasonableness of the Claimants’ projections…” and, at paragraph 5.11, that “[i]n considering the reasonableness of the Claimants’ projections, I have used as my primary measure of comparability the apparent market appeal of the relevant artist at the time the films were released, based primarily on total album sales…In doing this, I do not put forward my own views on the relative qualities of he films, but am looking for evidence that would support the commercial basis for the Claimants’ projections”.   He then went on to consider whether each of the films in question would be useful as a comparator in assessing the reasonableness of the claimants’ projections for the film of the RAH Concert.
183.	It is plain from what follows that Mr MacGregor proceeded to do what he had disavowed any intention of doing: he put forward his own subjective views on the extent to which a given film might or might not serve as a valid comparator.   I need cite just two passages which make this clear:
“5.14	Woodstock - Mr McDermott states that “Woodstock” won an Academy Award and was at the time he prepared his witness statement the highest grossing music documentary of all time.   I have been unable to find reliable figures for box-office takings for this film, but these appear to be $50 million.   Given that it featured Jimi Hendrix, it is likely to appeal to the same type of market as the film of his performances at the Royal Albert Hall film.   However, the Woodstock festival is widely recognised as one of the important music events of the twentieth century, and was listed among Rolling Stone’s Fifty Moments That Changed The History of Rock and Roll”.   It therefore seems incomparable to the Royal Albert Hall concert in terms of its significance.   Further, given that it won an Academy Award, “Woodstock” is likely to have been at least as well produced as the Royal Albert Hall film and the award would make it appeal to a wider audience.   Further “Woodstock” features several high profile artists.   On this evidence, it seems to me that the film of the Royal Albert Hall concert is not comparable to “Woodstock”.”
And later:
“5.20	Neil Young “Heart of Gold” - I explained how I consider that Neil Young appears to be a comparable artist in terms of his album successes.   Neil Young is also an artist that first recorded in the nineteen sixties and had a successful album in 1970.   On this basis, it seems logical to me that the market appeal of Neil Young appears to be comparable to that of Jimi Hendrix.   Further, the evidence provided does not indicate that the film of the Royal Albert Hall performance would be superior to that or Neil Young, for example I note that “Heart of Gold” was also directed by Jonathan Demme, the Oscar winning director.   There are a number of factors that may affect the comparison for example the finite quantity of Jimi Hendrix material, the ability of Neil Young to self-promote his own material and the comments on quality made by Mr Goldstein.   There may also be others.”
He performed a broadly similar exercise in his consideration of DVD and CD sales concluding that DVDs would generate worldwide revenue of $6.25 million (noting that “this is marginally more than the level of sales achieved by comparable DVD releases of live performances such as Bob Dylan and Neil Young …”) and that CDs would generate worldwide sales of $5.8 million over the five-year period from release which he was considering.
184.	He then assessed what costs should be deducted from the gross revenue of each of the categories (film, DVDs and CDs) that he had considered.   He rejected as altogether too speculative the claimants’ projections of revenue from merchandise, ringtones, radio and TV commenting that “I have been unable to provide my own assessment of the likely revenues that would be earned”.
185.	Mr MacGregor next considered various assumptions made by Mr Boulton in his calculation of damages, namely sale patterns over the first five years following release (this was the period considered by both experts as being relevant to the computation of revenues), the steady state of sales in years 6 and following, the decline in the market for physical sales of recorded music, the appropriate discount rate to apply to projected revenue streams, whether or not the claimants should be treated as having mitigated their losses, the ratio of US sales to the rest of the world and the incurring of further “up front” costs prior to release.   Some of the assumptions he accepted, others, notably on discount rates, he did not.   His own calculation of damages, summarised earlier, were then set out.
186.	Mr MacGregor’s report was followed by a second report from Mr Boulton.  Mr Boulton again emphasised that he was not putting himself forward as an expert on the music industry.  Dated 8 February 2010 the report’s main purpose was to comment on Mr MacGregor’s report.  It also commented, so far as it lay within Mr Boulton’s expertise to do so, on the report of Mr Orr (on the costs to be deducted from box-office receipts to arrive at the share of those receipts to be attributed to the claimants as “producers”) and of Ms Harris on the level of license fee which might appropriately have been charged for permission to produce and distribute the covermount that is in dispute in this litigation.   He disagreed with Ms Harris’s approach to the calculation of the license fee but stated that this turned for the most part on questions of law.   He did not question Mr Orr’s figures but, as I read his report, applied them to his own calculations.
187.	His overall response to Mr MacGregor’s report was twofold: (1) he considered that there was an insufficient basis for certain of Mr MacGregor’s adjustments to the claimants’ estimates of loss of profits and (2) he disagreed on the approach to the discounting of revenue projections.   He then stated, at paragraph 2.5, that:
“…I do not believe that it will be helpful to the Court to substitute my subjective estimates for the subjective estimates of either the Claimants’ or Mr MacGregor.   I have therefore not provided my own estimate of loss independent to those of Mr McDermott, Mr Goldstein or Mr MacGregor…”
188.	Having so stated he then went on, in paragraph 2.6, to state that:
“I have, however, adjusted Mr MacGregor’s calculations where it appears to me that Mr MacGregor’s revisions to the Claimants’ estimates are themselves not reasonable.”
After making those adjustments, he produced the revised estimates set out earlier, namely $9.8 million (inclusive of interest) based on the first claimant’s projections and $18.2 million (inclusive of interest) based on the second claimant’s projections.   In both cases, the calculations were as at the date of infringement (September 2006) rather than, as he had previously calculated them, as at December 2008.   He again took a 27 month period of delay.   He stated in paragraph 2.13 that “the revised figures for the minimum fee that would in principle have been acceptable to the Claimants for a hypothetical licence are the same as my revised damages figures”.   In short, it made no difference, in his view, to the outcome if a licence fee had been charged.
189.	In the main body of his second report, Mr Boulton analysed Mr MacGregor’s approach in some detail.   He prefaced that analysis with some general observations on revenue projections and by stating “four general points” about Mr MacGregor’s approach.   I set out those observations and the four general points as they give the flavour of the criticisms that were to follow:
“3.5	I agree with Mr MacGregor that projections should have a commercial rationale behind them.   In this case, it appears to me that there is a commercial basis for the projections (this is not to say that there might not be alternative assumptions that could be made).   Projections about future sales performance are inherently uncertain, and such uncertainty is magnified in the absence of historical sales information for the project itself.   It is therefore not surprising that the two Claimants have prepared projections which differ, and that the forensic accounting experts might also reach different conclusions.
…
3.7	I also note, however, that Mr Goldstein and Mr McDermott have an extensive experience of the exploitation of the Hendrix Rights.   I understand that their projections for the project will be subject to considerable scrutiny at trial, and that the Court will take its own view of their likely accuracy.   In the meantime, however, it does not appear to me to be appropriate to substitute my own projections for theirs, except where it is clear that their projections require adjustment.”
He then made his four general points about Mr MacGregor’s approach:
“3.9	First, it seems to me that Mr MacGregor overlooks the iconic status of Jimi Hendrix.   Jimi Hendrix appears as  No. 1 in almost every list of the Top 10 or Top 100 electric guitarists of all time.  His live performances are legendary and he is a major influence on musicians today.   One does not have to be a music expert to know that he has qualities that set him apart from other recording artists with similar sales.    This does not of itself mean that the RAH project would have been or will be a huge success, but it does, in my view, mean that sales forecasts have to take into account the unique characteristics of the artist and the project.
3.10	Second, in some instances, it appears to me that Mr MacGregor substitutes his own opinion for that of Mr Goldstein or Mr McDermott on the basis of what is little more than subjective opinion eg as to likely sales of the RAH project by reference to other CDs or DVDs…    it is not clear to me that the Court will be assisted by the substitution of the opinion of a forensic accountant for that of the Claimants on matters that primarily concern the importance of Jimi Hendrix as an artist and the likely success of the RAH project.
3.11	Third, Mr MacGregor says that he would expect revenues from the project to ‘bear some relationship’ to other releases by Jimi Hendrix and to ‘the success of other comparable musicians and other comparable releases’.    A ‘relationship’ can encompass anything from a fraction to a multiple of revenues.   Additionally, the sales of other Jimi Hendrix albums show significant variation both between themselves and over time.   For instance, sales of ‘Are You Experienced?’ and ‘Live at Woodstock’ fluctuated significantly between 2003 and 2005.   It therefore seems to me that the sale success of the RAH project will depend in large part on factors specific to that project: the importance of the concert, its place in the hearts and minds of Hendrix fans, the potential to win new fans to his music, the quality of re-mastered recordings and film footage, the amount of publicity and advertising supporting the project and so on.   In saying this, I am again not suggesting that the project would necessarily have been a success, but asserting that its level of success will be dependant primarily on characteristics of the project itself.
3.12	Finally, I do not know what precisely Mr MacGregor means when he refers to ‘comparable releases’.   I would consider it difficult, even in subjective terms, to identify artists who are ‘comparable’ to Jimi Hendrix and events which are ‘comparable’ to the RAH concerts (as that term is generally understood in the context of intellectual property licensing).   Put in other terms, I do not know how Mr MacGregor would seek to ‘take account of the material differences between the [previous live] releases in terms of their market appeal’ without undertaking significant market research.”
190.	I agree with all four of those sentiments.  They make the task of predicting the likely success of the Project well nigh impossible.   
191.	But to reject the approach that Mr MacGregor has espoused and adopt instead the projections by one or other of Mr Goldstein and McDermott, except only to the extent that adjustments are clearly needed, because (as Mr Boulton noted) they have “extensive experience of the exploitation of the Hendrix rights” scarcely assists: their projections too are no less “subjective” than Mr MacGregor’s figures.   In effect, Mr Boulton is inviting the court to prefer the subjective assessments of the claimants - unsupported though they are by any objective evidence - to the subjective approach adopted by Mr MacGregor.
192.	After completing his analysis, Mr Boulton commented on Mr MacGregor’s approach to the contraction in the recorded music market, the approach to steady sales in years six and beyond after the release date, and the appropriate discount rate to apply to future losses.
193.	These reports led, following a without prejudice meeting, to a joint statement by the two accountancy experts.  Dated 12 March 2010, paragraph 3.3 contained an acknowledgement by Mr Boulton that there were elements of the claimants’ projections that he was not in a position to evaluate and were matters for the court to decide in the light of the evidence at the trial.   Both experts agreed that “the volume and value of sales and profits that the …Project would have generated had it been released in March 2007 and that would be generated …in future are uncertain.”    They agreed that “projections should have a commercial rationale behind them” and that “one approach to assessing the reasonableness of projections of the … Project is to consider revenues and profits achieved by ‘comparable’ releases.” They agreed, however, that “the question as to what extent other releases are sufficiently comparable to provide helpful evidence as to the likely sale performance of the …Project is subjective”.
194.	The joint statement summarised the projections of worldwide gross box-office receipts for the theatrical film release as $66 million (Mr Goldstein), $15.6 million (Mr McDermott) and $7.5 million (Mr MacGregor).   Mr MacGregor’s figure was achieved by averaging the US box-office revenue for three films (released respectively in 1984, 1987 and 2006), none of which featured Jimi Hendrix (the artists being Prince, Neil Young and Talking Heads) and then extrapolated from the average so reached to provide a worldwide figure as the average related simply to US box-offices for those three films. 
195.	Mr Boulton, not surprisingly, was unhappy with this approach.   The joint statement repeated his view that “… it is extremely difficult to produce forecasts for the theatrical film release based on the performance of previously released films given the difficulty in identifying suitable ‘comparable’ films”.   In other words, Mr Boulton was, failing reliable comparable evidence, sticking to the widely divergent estimates, subjective though they are and without objective statistical support, of Mr McDermott and Mr Goldstein.
196.	The joint statement set out other criticisms by Mr Boulton of Mr MacGregor’s approach, including a failure, in his view, to allow for inflation in order to express in terms of their 2006 $-equivalent box-office takings dating back to the 1980s.   The statement noted Mr MacGregor’s disagreement that it was appropriate to take inflation into account and recorded his view that “there are many other factors that could affect the box-office takings about which there is insufficient information to enable a scientific calculation to be performed”. 
(d)  Conclusions   
197.	I have come to the clear conclusion that it is quite impossible to forecast, so as to provide a reliable basis for computing losses, what the box-office takings are likely to be for a film, whether in the US or beyond, which has yet to be released, which, at the time of the trial, had not even been completed and which none of the independent experts giving evidence before me had seen in any shape or form and, if they had, would not have possessed the relevant expertise to comment on.  I entirely agree with Mr Boulton’s criticism of Mr MacGregor’s approach.  Moreover, I notice that in their written closing submissions Mr Hobbs and Ms Himsworth do not commend or comment in any way upon Mr MacGregor’s rival estimate of loss.  
198.	Mr Jones sought in his and Mr Cuddigan’s written closing submissions to draw comfort from the fact that, when adjusted for inflation, Mr MacGregor’s $7.5 million income projection for the film would rise to $13.1 million, only $2.5 million less than Mr McDermott’s figure.   It was submitted that this represented “a remarkably close fit” and that it provided “telling support for the cautious approach Mr McDermott adopted to his projections”.   I do not agree.   If, as Mr Boulton thought and I accept, Mr MacGregor’s approach was speculative and subjective and therefore to be rejected, the fact that, making this adjustment to his figure (which Mr MacGregor himself would not have made), the result of his approach is near to, if not the same, as the corresponding figure stated by Mr McDermott (a figure which was, itself, reached after a number of adjustments) is no more than coincidence.   It cannot credibly provide support. 
199.	But that merely left the estimates of Mr McDermott and Mr Goldstein which, to my mind, were just as vulnerable to criticism, if not more so, than Mr MacGregor’s.   Mr Hobbs submitted that the paucity of the information and disclosure that Mr McDermott and Mr Goldstein provided was so great as to make it practically impossible for anyone to identify and test the validity of the underlying assumptions upon which their widely divergent projections of loss were based.  I agree.  I take the view that the exercise that Mr McDermott and Mr Goldstein, together with the two experts, have undertaken in seeking to forecast what profit the film will make is so speculative as to be little better than guesswork.   It provides no basis upon which to found a claim for the very substantial damages that they seek.  
200.	If it is not possible to predict the gross takings to any reliable degree, it is no less idle to attempt a calculation of the costs of distributing and showing the film.   In any event, the two experts were unable to agree what the overall percentage deduction should be from gross takings to arrive at the claimants’ due share of those takings.  A variety of deductions have customarily to be made from the gross takings before the producer (in this case the two claimants) receive their share.   Suffice it to say that the deductions include the fees required by the cinemas where the film is shown. This varies depending on where in the world the cinema is located.  According to Mr Orr, in the United States it is 50-70% of gross takings, in the UK it is 65-70% and elsewhere it is 55-65%.  Then there are the various costs incurred by the distributor of the film, for example marketing it and making copies of it for the various cinemas where it will be shown.  Then there is the distributor’s percentage, typically 25% of gross takings.  The producer receives what if anything is left from which he must discharge his own outlay and any commission and other expenses which he has incurred.   
201.	Projections of unit sales of DVDs and CDs (and box sets of each) calculated for the first five years following release seem to me to be just as much a matter of guesswork.   The fact that Mr McDermott’s and Mr Goldstein’s estimates were not so divergent for these sources of revenue as for the film’s expected box-office takings (they were much closer for the unit sales of DVDs than for CDs where the second claimant’s estimate exceeded the first claimant’s by a third) does not help.    It was abundantly clear from the evidence that their figures for unit sales were based on their expectations for the film.   In short, the greater the film’s success, the greater the volume of DVD and CD sales that can be expected.   They are therefore as vulnerable to error, and are as much a matter of subjective expectation, as are the projections for the film itself.   It does not assist the calculation that there was little difference in the evidence over the unit cost of DVDs and that all were agreed that there should be a uniform deduction of 25% to cover the distribution costs of CDs.   The difficulty is in establishing the volume of sales.
202.	I should add that the offer which Mr Goldstein said that he had received from Best Buy of between $10 million and $20 million for the exclusive distribution in the United States of DVDs and CDs (and their box sets) and upon which he appeared to place much reliance in his evidence is not something to which, without more, I can attach any weight.   There is not one scrap of paper to evidence the negotiations which Mr Goldstein said that he had had with Best Buy.   It was not clear where or when or in what circumstances the offer was said to have been made or what the terms were on which any sums would be paid.  Indeed, it was not even clear to me whether the offer was something that Mr Goldstein had discussed with Best Buy or whether it was someone else who had done so and Mr Goldstein was simply conveying what he understood the position to be. He was cross-examined about it.  He was unable to provide any further illumination.  
203.	When one comes to ringtones, TV and radio income and merchandise the element of guesswork is, if anything, even greater.   Mr McDermott’s projected profits from merchandise was $2.5 million and from ringtones, TV and radio it was $1.79 million (in each case after adjustment).   Mr Goldstein’s figures were $15 million and $3.9 million respectively.   I do not doubt that these are important sources of revenue.   But they too are dependent upon the success of the film.   
204.	Does this mean that I should decline to award the claimants any damages on the footing that they have failed to discharge the burden which is upon them to prove their loss?   Since I have concluded that the distribution of the covermount caused a year’s delay to the Project - and there is nothing to indicate that such a delay will enhance the Project’s financial prospects so as to offset any loss to them from the year’s delay in their receipt of profits - this would be a most unsatisfactory outcome.   
205.	In the midst of the mass of speculation about how well the Project will fare, two figures emerged to which, in my view, it is possible to anchor an assessment of the claimants’ losses from the delay.   
206.	The first came from the distribution agreement with Sony entered into on or about 17 March 2010 but which, by its terms, is treated as having been entered into on 1 March 2010.   The agreement was too late to feature in the main reports of Mr Boulton and Mr MacGregor and therefore in their joint statement. It did feature in a supplemental report by Mr Orr and in a second report by Mr MacGregor produced in time for the last day of the trial before I adjourned to a later date for counsels’ closing submissions
207.	Under that agreement Sony acquires the right to distribute worldwide for a term of 25 years the film and audio recordings of the RAH Concert and associated footage both as a feature film and in DVD and CD format.   It provides for the claimants to deliver the film “fully cleared for exploitation in all media… on or about June 30 2010 in a form and format technically satisfactory to Sony for [its] commercial release”, including the accompanying DVDs and CDs. This is with a view to a release of the film on or about 18 September 2010, which will be the 40th anniversary of Jimi Hendrix’s death.
208.	The agreement contains an acknowledgement that Sony has reviewed the film’s footage and that both sides agree that “further work is required to edit said footage”.    It therefore envisages the appointment of a director and an editor to complete the film, with Sony having the final word on those appointments.
209.	Critically for present purposes, the agreement provides for the payment by Sony to the claimants of a $2 million advance (to be shared equally by the claimants) within 45 days of satisfactory delivery of the completed film and the DVD and CD.   The advance is to be recouped by Sony from the exploitation of the film, DVD and CD.
210.	The agreement gives to Sony the right within 120 days of 1 March (effectively therefore the end of June 2010) to terminate the agreement. If that option should not be exercised, Sony has the right to terminate the agreement with respect to the distribution of the film or DVD (or both) within 30 days of delivery of the film leaving it with the right to distribute and exploit the CD alone, but subject to a right in the claimants to terminate Sony’s residual rights of distribution.   Should Sony exercise its right not to distribute the film and DVD (leaving it with the CD alone) the advance is reduced from $2 million to $500,000 in the event that “a major film company” (e.g. Warner Brothers, Paramount, Universal, 20th Century Fox, or the like) should distribute the film or $250,000 if a “non-major film company” should distribute it or if the film should not be distributed theatrically at all.
211.	In addition to the advance, Sony agrees to fund the first $500,000 of the print and advertising costs unless Sony’s rights are limited to the CD.   These are the costs of marketing and advertising and the cost of making copies of the film to send to the cinemas. Like the other advance, this too is to be reimbursed to Sony, in this case from the first proceeds of exploitation of the film.
212.	Once the advances (potentially a maximum of $2.5 million) have been recouped, any further gross proceeds from exploitation are subject to a 25% distribution fee for Sony except that outside North America and the UK the deduction is by way of a 25% royalty calculated on the so-called published price to dealer (in effect a higher rate of deduction than 25% of gross proceeds)  and with lesser percentages (if the claimants agree) for so-called “mid-line” and “budget” published price to dealer arrangements.   In the case of television broadcasts of the film, Sony’s distribution fee is 30% of gross proceeds.
213.	In his supplemental report Mr Orr commented on the Sony agreement.   He noted that, although “often one would see in [a distribution agreement] how many cinemas a film is going to be distributed to...   Sony has not made any release commitment at all”.   He stated that a distributor either makes a release commitment to a specified number of cinemas or it does not.  He noted too that in North America and the UK, over and above the first $500,000, all of the costs of marketing, advertising and making copies of the film to send to the cinemas, and any other payments to be made to third parties, are to be paid by the claimants.   He stated that if, as Mr Goldstein appeared to assume, there was to be a cinema release to 1500 cinemas (in fact, in the course of his oral evidence, Mr Goldstein revised this and said that he envisaged a release worldwide to 3000 cinemas) the print and advertising costs of so doing “would run into millions of dollars” so that if the film should be released to anything like that number of cinemas the claimants would have to fund those extra costs themselves. 
214.	The second figure appears in a rival offer which Universal made to the claimants for the DVD and soundtrack rights alone.  The right to distribute the feature film was not the subject of Universal’s offer but the letter of offer (it is dated 23 July 2009, the same date as the offer by Sony which led nine months later to the agreement of March 2010) indicated a willingness to enter into discussions.  The letter offered an advance of $3 million. The term of the agreement on offer was seven years with an extension of up to three if by the expiry of the seven years recoupment had not been achieved.  It envisaged a distribution fee of 25% for sales in North America and a licence royalty for the rest of the world of 24% PPD with an additional 8% for publishing rights on the DVD.  In the event, the Universal offer was not proceeded with.  The claimants preferred to deal with Sony which was offering for the Film distribution rights as well as the DVD and CD rights.
215.	In my judgment the figures on offer by way of advances from these two sources provide the only firm basis for assessing what independent third parties who, as I understood it, have viewed the footage and heard the soundtracks are willing to pay “up front” as an estimate of the profit which the claimants can expect to make from the distribution of the film, DVD and CD.  There is no knowing whether anything would have come from the Universal offer if the claimants had pursued the matter with that organisation.  The agreement entered into with Sony has let-out clauses and I am not aware whether in the meantime Sony has sought to exercise them.
216.	Mr Jones submitted that the advance of $2 million payable under the claimants’ agreement with Sony represented the absolute minimum that they will receive from the exploitation of the film and the accompanying DVDs and CDs.   That may be true.   But how much more, if any, will they receive?   Any attempt to answer that question is little better than guesswork.   I repeat what I have set out at paragraphs 143 to 148 above. 
217.	Doing the best I can I consider that the maximum by way of profit from the release of the feature film and from the sale of DVDs and CDs which, on the information before me, I am willing to say that the claimants will receive from those parts of the Project is $3 million.  I consider this to be generous to the claimants as it gives them the benefit of the higher advance on offer, but not pursued, from Universal.  It may well be, I do not know, that Universal’s offer was in the larger amount because it did not involve it in having to distribute the feature film.   
218.	I have considered whether I should make any adjustment to reflect the fact that, as I accept to be the case, the market in CDs has been in steady decline so that a delay of a year in the launch of the Project is likely to result in a loss of CD and CD box sales.   The evidence indicated that the decline has been partially, but not wholly, offset by an increase in legitimate downloads and therefore in an increase in revenue from that source.   How that would have been reflected by way of advance if the agreement with Sony had been negotiated in, say, March 2007 with a view to a release in September 2007 (rather than September 2010) I am unable to say.   I rather suspect, but I cannot be certain, that it would have made no difference.   The difficulty, however, is in arriving at a figure for CDs and CD box sets to which the percentage reduction in sales by reason of market contraction can be applied.   It is the same difficulty that I have found in attempting any forecast of how the Project would have fared whatever the date of its launch.   
219.	That leaves for consideration the delayed receipt by the claimants of the profits they can expect from ringtones, TV and radio and general merchandise.   According to Mr Orr, these are some of the items which, generally speaking, generate the majority of revenue if the film in question is not a box-office blockbuster.
220.	As I have stated earlier, the evidence on what revenue is likely to come from these sources is, if anything, even more imponderable than it is for the theatrical release of the film and from DVDs and CDs.  In the case of merchandise, however, there was documentary evidence (admittedly slender) that in December 2004, an entity called the Signature Apparel Group, was willing to offer for 100% of the apparel rights (t-shirts and the like) in return for a $250,000 advance and an 8% royalty on all products sold with a minimum guarantee of $2.5 million. In the case of ringtones, Mr McDermott referred to a written offer from Eminent Entertainment LLC (a US company based in Indianapolis) to pay the claimants a 20% royalty on all gross revenue received from the sales over a three-year period with a guaranteed minimum of $300,000 payable by three equal annual instalments of $100,000.   There was, however, nothing in the evidence to make the claimants’ figures for TV and radio income other than entirely speculative.
221.	I propose therefore to assume that income from these additional sources would have yielded over time at least $2.8 million.   (Of course, as with the film and the DVDs and CDs, events may turn out much more profitably for the claimants.)   As a result of the covermount, however, its receipt will have been delayed for a year.  
A break in the chain of causation, alternatively contributory negligence
222.	There is one further matter which I should mention before coming to my conclusion on the amount of the damages to be awarded to the claimants.  At paragraph 92 above I referred to the permission which I gave to the defendant to amend its defence to raise a plea to the effect that any damage suffered by the claimants as a result of the suspension of the Project was wholly or partly the claimants’ own fault with the result that either there was a break altogether in the chain of causation or the claimants contributed to their own damage.   
223.	The gist of the plea was that if the suspension of the Project was justified because of the distribution of the covermount, the suspension should have been confined to the UK; the Project should have proceeded elsewhere.   Suspending the Project worldwide and doing so for upwards of three years was, it was said, an excessive reaction to the covermount.   It operated either to break the chain of causation altogether or, to the extent that the claimants suffered loss in consequence of the suspension outside the UK, that loss must be laid at the claimants’ own door: it should not form part of any claim against the defendant.
224.	I am not persuaded that there is any merit in this contention.   The claimants decided, and were so advised by Endeavor, to have a single worldwide launch.   The UK (and London in particular where, after all, the RAH Concert took place) was a key part of the Project.   In my judgment, the claimants are not in any way to be considered the authors of their own loss because they suspended the Project worldwide and not just in the UK.  Their damages are not to be reduced on that account.
The result
225.	I therefore find that the defendant’s infringement of their rights by the distribution of the covermount has caused the claimants to be deprived of the receipt of $5.8 million for a period of twelve months. 
226.	The next task is to value the loss to the claimants of the delayed receipt by them of that amount for that period.  In order to keep the assessment as straightforward as possible I proceed on the footing that all of the $5.8 million would have been received by the claimants on 1 September 2007 but as a result of the covermount’s distribution was delayed by twelve months to 1 September 2008.  Relevant to this is that very nearly all of the $5.8 million would have been received by way of advances either at or even possibly to some extent before the actual launch date of the Project.  In the same endeavour I propose to ignore any saving to the claimants from the fact that the twelve months of delay would be likely to have resulted in a delay in the expenditure by them of further monies to bring the Project to completion: how far this would have been so is very much a matter of conjecture.  It is simplest to ignore this offsetting element in the calculation.  Similarly I do no propose to take account of any profits that the claimants might be expected to have earned in the period of delay which they would not otherwise have done.  This too is imponderable and, in any event, there was no evidence that they did turn their attention to other sources of profit which they would not otherwise have earned.  Nor do I propose to take any account of the impact of tax which was another of the topics debated before me.  In any event the burden was on the defendant to show that any damages received by the claimants would not be subject to tax: the defendant failed to show that they would not be.
227.	It was common ground between the parties that the date of infringement, namely 10 September 2006, is the date at which damages fall to be assessed.  It was also common ground that in so doing it is permissible to take account of subsequent events in order to clarify and render certain what at the date of assessment was foreseeable but uncertain.  
228.	In order to express as at 10 September 2006 the loss to the claimants resulting from their delayed receipt of the $5.8 million,  it is necessary to discount to that date the amount of their loss and then to add interest to the discounted figure to produce an overall award of damages to the date of judgement. There was much debate before me what the appropriate discount rate should be.  Given the nature of the payments that make up the $5.8 million (essentially advances) and the fact that I am concerned to discount from one past date back to an even earlier date, I consider that it is sufficient to discount the value of the delayed receipt of the $5.8 million simply by applying a rate of interest to reflect the impact of the time value of money.  There is no need to reflect any risk of uncertainty of future outcome.  I consider that the appropriate measure is the US base rate from time to time plus 1%.  
229.	How then does this work out?  Again, to keep the calculation as straightforward as possible I propose to compensate the claimants for their loss of the use of the $5.8 million by (1) calculating interest at US base rate from time to time plus 1% on $5.8 million for the period 1 September 2007 to 1 September 2008, (2) discounting the figure reached in (1) back to 10 September 2006 (effectively one year) at the same rate (i.e. US base rate from time to time plus 1%) and then (3) adding interest to the sum reached in (2) at the same rate (i.e. US base rate from time to time plus 1%) and without rests from 10 September 2006 to the date of this judgment.  I take US base rate plus 1% as the relevant measure since the claimants would have received the monies in the United States and in US Dollars.   It will be for counsel and their advisers to do the calculation.  In my judgment, that is the measure of the claimants’ recoverable loss established by the evidence at this trial.  It is very substantially less than the millions that they were claiming.  But their claims, even the relatively more modest one of the first claimant, seemed to me, standing back, to be altogether out of proportion to the true scale and effect on the Project of the covermount’s appearance.