The movie industry has no rights to the profits made by the owner of Usenet-indexing website Newzbin2 by infringing on copyrights, the England and Wales High Court of Justice, Chancery Division, has ruled.
"A copyright owner does not have a proprietary claim to the fruits of an infringement of copyright. I shall not, therefore, grant proprietary injunctions," wrote judge Guy Newey in a ruling published on Tuesday. The ruling could have implications for the software industry.
The Motion Picture Association of America (MPAA), represented by Universal Studios, Warner Bros., Paramount Pictures, Disney and Columbia Pictures, sued David Harris, the operator of the Newzbin2 website, and Christopher Elsworth , who used to run the site's predecessor Newzbin.com. The studios sued on behalf of themselves and other companies in their groups, and alleged they were entitled to money Harris derived from copyright infringement.
Newzbin2 was a UK website that indexed binary files posted on Usenet. The site also created files in the NZB format listing all the Usenet messages containing the constituent parts of a posted binary file, allowing users to download the posted files more easily.
The studios started litigation against the site's predecessor, Newzbin, in 2008, and the same High Court of Justice ruled in 2010 that Newzbin was liable to the studios for copyright infringement. Newzbin's course of conduct was deliberate because its operators well knew that the vast majority of the materials in the Movies category of the website were commercial and so likely to be protected by copyright, the court said in its 2010 ruling. Users of Newzbin who downloaded those materials were infringing that copyright, the court said at the time.
After the ruling, Newzbin was taken down, but soon after this Newzbin2 came into existence, essentially doing the same as its predecessor. Newzbin2 was closed by its operators in November last year.
The studios already obtained injunctions freezing Harris' bank accounts; those of the NZB Foundation which seems to own the property in which Harris lives; those of his company Kthxbai, which is said to have received payments from Newzbin2, and another company Motors for Movies, which owns the McLaren car Harris uses, Newey wrote.
The studios however, then sought a different kind of injunction, a proprietary injunction, claiming title to Harris' assets and those of his companies, arguing that as copyright owners they had a proprietary claim to the proceeds of infringement of those copyrights. That request was the subject of Newey's ruling published Tuesday.
Newey ruled that a copyright infringer cannot be compared to a thief who steals a bag of coins, as submitted by the studios' lawyer. "A copyright infringer is more akin to a trespasser" than to a coin thief, Newey said.
"That leads to the next point: that a landowner has no proprietary claim to the fruits of a trespass," he said. While the landowner could claim an account of profits in some exceptional circumstances, the authorities do not, however, support the proposition that the landowner could assert a proprietary claim against the trespasser, Newey wrote.
"Suppose, say, that a market trader sells infringing DVDs, among other goods, from a stall he has set up on someone else's land without consent. The owner of the land could not, as I see it, make any proprietary claim to the proceeds of the trading or even the profit from it. There is no evident reason why the owner of the copyright in the DVDs should be in a better position in this respect," he said.
The studios' lawyer had argued that the entire proceeds of a sale should be held on trust for the copyright owner.
"That might both be unfair and stultify enterprise," Newey wrote. "It might not seem just for even a deliberate wrongdoer to have to pay the copyright owner the amount of his gross receipts, and an infringer need not have known that he was breaching copyright," he said. If the studios' submissions were correct, a person might be deterred from pursuing an activity if he thought there was even a small risk that the activity would involve a breach of copyright or other intellectual property rights.
This, as was submitted by Harris' lawyer, would have a chilling effect on innovation and creativity, Newey said.
The MPAA will seek leave to appeal the case because it believes the decision does not take the specific facts of this case into account, a spokeswoman said in an email.