19. 06. 2023
Probably every moderately proficient internet user has downloaded a movie, TV show or music album for their own use at some point in the past. This might be immoral, but it is generally not illegal, let alone criminal. However, it is a different situation if someone "unlawfully interferes not insignificantly with the legally protected rights to a copyright work, artistic performance, sound or sound-visual recording, radio or television broadcast or database", i.e. his or her conduct fulfils the elements of a criminal offence under Section 270 of the Criminal Code. How is the amount of damages determined in such a case?
By the resolution of the police authority, the prosecution of the client M. K. was initiated for the criminal offence of infringement of copyright, rights related to copyright and database rights under Section 270(1), (2)(c) of the Criminal Code. M. K. was alleged to have committed the offence by intentionally placing copies of a total of 106 audiovisual works and audiovisual recordings on a freely accessible internet storage site, thereby enabling anyone to download these copies. The amount of the damage, exceeding CZK 730.000, was then determined by the police authority as the amount which the companies holding the distribution rights to the works in question would have received if they had "themselves legally made the relevant works available in a comparable manner and to the same extent at the same time as M. K."
By consulting the investigation file, it was found that the police authority only took over the quantification of the property damage made by the association of legal entities. This calculation was, in simple terms, based on the amount which the holders of the distribution rights of the titles in question would have received in the Czech Republic if they had made themselves the works in question legally available in a comparable manner and to the same extent in the same form. It was therefore lost profit in the amount of the remuneration that would have been customary for obtaining such a licence at the time of the unauthorised use of the work within the meaning of Section 40(4) of Act No. 121/2000 Coll., on copyright and related rights and on amendments to certain acts (Copyright Act).
However, the relevant and, from the point of view of the legal qualification, crucial question is whether this method of calculation can be regarded as correct.
As regards the issue of quantifying the damage caused to copyright holders by making the work illegally available to the public, the legal regulation of claims arising from copyright infringement at the level of EU law is based on Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (hereinafter referred to as the Directive). In short, according to the Directive, the primary method of compensation for infringement of intellectual property rights, including copyright, is to be the determination of lost profits, and compensation should always be at least as high as the amount of lost profits that the injured party has proven to have actually occurred. Lost profits mean what the victim's assets would have increased by if the infringer had not committed the infringement. The decisive factor is the causal link between the lost profits and the criminal offence of the infringer, which must be examined and established to the requisite degree of certainty. The determination of the amount of the damage caused cannot be replaced by the victim's own discretion, moreover, unsupported by any relevant evidence. The amount of the damage must be examined and proved beyond reasonable doubt. An alternative to this basic method is to determine damages on the basis of a royalty, but only after the actual lost profits cannot be established at all or only with great difficulty.
In the case described above, the police authority should therefore not have been satisfied with the assertion of the interest association of legal entities about the amount of lost profits, but should have brought in an expert in the field of economics, the sector of prices and estimates, specialising in the valuation of intellectual property, to clarify the essential facts concerning the determination of the amount of damage (lost profits). The expert's task should have been to comment on whether it was actually possible to objectively determine the specific lost profits of the right holder under the Copyright Act and related rights arising in a causal link from the client's unauthorised reproduction and distribution of the copyright work and its uploading to the data storage facilities of the Internet computer network, from where it was downloaded by Internet users. The expert would also have taken into account the specific environment of the Internet computer network through which the defendant M. K. made the work available, in relation to the income that would have accrued to the victims if they had made the work available to users of the public Internet computer network through file hosting servers at the relevant time and under comparable conditions. Only if the expert concludes that the specific lost profits cannot be ascertained at all or only with great difficulty in a given case, the amount of damages could be determined by an alternative method within the meaning of the Directive on the basis of a royalty.
An equally important aspect in determining the amount of damage caused by the criminal offence of infringement of copyright, rights related to copyright and database rights is the determination of the threshold at which the perpetrator has already committed this offence to a significant extent and thus fulfils the characteristic of a qualified offence within the meaning of Section 270(2)(c) of the Criminal Code.
According to the commentary literature, "whether a criminal offence under paragraph 1 is committed to a significant extent, must always be assessed on the basis of the particular circumstances of the case. The interpretative rule set out in section 138(1) for determining the amount of damage cannot be applied here to determine the significant extent. In assessing whether the perpetrator has committed the offence to a significant extent, the scope of the infringement of a legally protected right in the assessed case shall be considered in the first place, where the gravity and intensity of such an interference shall be decisive, in particular in terms of the specific protected right to a copyright work, artistic performance, audio or audio-visual recording, radio or television broadcast or database, the nature and intensity of the infringement of personality and property rights, or alternatively the extent of the market on which the works or products infringing such protected rights were marketed (whether it was a national, regional or just local market), the extent to which the offender's conduct affected the rights of authors, performers or producers of audio or audio-visual recordings, broadcasters of radio or television broadcasts, acquirers of databases, or other entities that lawfully supply such works or products to the market, etc. It will also be important to determine whether the activity was continuous or prolonged, and in the case of prolonged and repeated interferences, it will also be necessary to assess the number of such cases, the duration of the infringement of the specific protected right, etc." As can be seen, there is therefore no unequivocal rule.
In the above-described case, M. K. was supposed to have unlawfully uploaded a total of 106 audiovisual works to an internet data warehouse and subsequently made them available to the public, which, according to the police authority, already constitutes a significant extent. In another case, the Supreme Court held that a criminal offence under Section 270(1), (2)(c) of the Criminal Code had been committed to a significant extent if a total of 850 audiovisual works had been uploaded to the relevant hosting servers (Supreme Court Resolution of 15 July 2015, Case No. 5 Tdo 740/2015). In another case, the offence under section 270(1), (2)(c) of the Criminal Code was committed in a significant extent, when 373 titles with a high number of downloads were placed on file hosting servers in at least 3,460 cases, and this was done for the purpose of achieving his own financial benefit, i.e. for profit and even in a so-called business manner, as the defendant received the sum of CZK 239,425 from the server operators for his actions (Supreme Court Resolution of 18 March 2020, Case No. 5 Tdo 117/2020). It is therefore debatable whether the threshold for committing a criminal offence to a significant extent is not too broad and serves as a so-called residual category for cases where the facts have not been fulfilled within the meaning of Section 270(2)(a) or (b) of the Criminal Code, but the police authority considers that a stricter assessment of the committed act should be made. From the point of view of legal certainty, it would certainly be desirable in the future for there to be at least a jurisprudential definition of the threshold when the offender has already infringed the legally protected rights to a copyright work, artistic performance, audio or audiovisual recording, radio or television broadcast or database to a significant extent.
For the time being, it is necessary to follow the criteria defined by the Supreme Court in its resolution of 8 October 2014, Case No. 5 Tdo 171/2014: "If the criminal offence of infringement of copyright, rights related to copyright and database rights pursuant to Section 270 of the Criminal Code by making an unauthorised copy of a protected copyright work available via a publicly accessible computer network (the Internet), e.g. by placing it on a data storage device, the damage caused to the holders of copyright and related rights to such a work takes the form of lost profits. The determination of its amount will be based on the amount that the right holders would have received if they themselves had made copies of the same work legally available in a comparable manner and to the same extent at the same time. The amount of lost profits cannot be derived from the usual price of a legally sold tangible medium (e.g. DVD or CD) containing a copy of such a work in the ordinary course of trade. If the amount of the damage cannot be reliably determined in this way and if the proven benefit of the perpetrator does not justify the application of a higher penalty rate, it is necessary to consider whether, in the case of extensive interference by the perpetrator with protected copyright and related rights, the offence of infringement of copyright, rights related to copyright and database rights to a substantial or large extent within the meaning of Section 270(2)(c) or (3)(b) of the Criminal Code has been committed."