In January 2019, we wrote about Virtuoso Legal’s success against Twentieth Century Fox in a High Court transfer application to the IPEC. Please see here.

In April 2019, we updated our readers about the court’s refusal of Twentieth Century Fox’s Appeal on the transfer of these proceedings to the IPEC. Please see here . You may recall from reading our blog that Mr Justice Birss stated that the “appeal [was] wholly without merit”.

Since Twentieth Century Fox’s failed appeal, the parties attended a CMC and we are pleased to announce that the parties have settled the proceedings, with the terms contained in a non-confidential Consent Order. However, the agreed settlement sums illustrate that Twentieth Century Fox’s approach to these proceedings was, in our view, disproportionate from the outset and akin to using a “sledgehammer to crack a nut”.

Background

During these proceedings, Virtuoso Legal acted for Cyclone Events Limited (“Cyclone”), which was a family-run events company, which is now in the process of strike off due to these proceedings, and the Stiwt Arts Trust Limited (“Stiwt”), which runs a 490-seater community arts theatre in Rhosllannerchrugog, in the northern Welsh county of Wrexham.

In September 2018, Cyclone, Stiwt and their respective directors were faced with High Court proceedings, brought by entertainment giants, Twentieth Century Fox Film Corporation, and their music publishing arms, TCF Music Publishing Inc and Fox Film Music Corporation (‘Fox’). This came after Cyclone performed its own version of Fox’s “The Greatest Showman”, set years after the events of the hit film, at the Stiwt Theatre last summer. The total ticket sales for the 7-performance production amounted to around £40,000.

Upon taking expert IP advice from the team at Virtuoso Legal, Cyclone, Stiwt and their directors immediately held up their hands, admitted that what they had done was wrong and accepted liability for copyright infringement before proceedings were even issued.

Despite this, the incensed individuals at Fox, represented by Wiggin LLP, proceeded to issue a High Court claim citing that the claim against the local theatre and others was worth “in excess of £200,000”. On the basis of its inflated estimated value of the claim, Fox paid a hefty £10,000 court fee for the privilege of High Court proceedings. For the reasons set out below, if Fox’s representatives had been realistic about the value of Fox’s claim from the outset, their court fee alone should only have been in the hundreds.

The Individual Defendants

Fox not only issued a claim against Cyclone and Stiwt, but also their individual directors, which resulted in grave concerns for the individuals, as they would be personally liable. This caused all the defendants much distress over the course of a year, as any personal assets would be on the line.

As a result of the proceedings, Cyclone went under. Cyclone was a family business run by Stewart Bassett and his 25-year-old son, Sam. Stiwt Arts Trust Limited, is a non-profit organisation, operating as a community arts centre in the small town of Rhosllannerchrugog, near Wrexham. It is a small theatre run by a handful of dedicated, hardworking employees and volunteers from the community, and is supported by the community as a whole. Gareth Thomas, 70, is a Director and Manager of the Stwit theatre. Rhys Davies is also a Manager of the Stwit theatre and was recovering from bowel cancer, but is now back in hospital. They were both made defendants in these proceedings by Fox, despite their limited involvement in the production.

Transfer to IPEC

In the view of IP experts at Virtuoso Legal, led by director Philip Partington, Fox’s issuance of these proceedings in the High Court against these individuals was grossly disproportionate. Accordingly, Virtuoso invited Fox to consent to a transfer of proceedings to the Intellectual Property Enterprise Court (“IPEC”) on multiple occasions. This was refused each time by Fox who maintained they had a claim of such magnitude that the IPEC was not appropriate. The IPEC is a court which is specifically designed to allow SMEs to bring or face litigation of intellectual property disputes, so it was the appropriate venue for the parties and a claim of this size.

Despite this, Fox forced the parties into an expensive hearing on 25 January 2019. By this point, Fox had incurred over £90,000 in legal fees and forced Cyclone and Stiwt into incurring legal fees of around £30,000, which they could ill afford.

At the transfer hearing on 25 January 2019, Fox argued:

• By way of a witness statement from Ms Caroline Kean, of Fox’s legal representatives, Wiggin LLP “that the damages in this case were likely to exceed the £100,000 threshold required to issue a claim in the High Court and it was reasonable to calculate that for the purposes of issue, the damages would exceed £200,000”; and
• Contained in the Skeleton of Fox’s QC “Fox believes that it has a real prospect of recovering an award in excess of £500,000”.

Virtuoso Legal always maintained that, given the total ticket sales for the production amounted to around £40,000, the value of the claim was “(at best) in the tens of thousands”, but Fox (presumably upon legal advice) steadfastly refused to accept this.

On 25 January 2019, Master Clark refused to accept that Fox’s damages claim could be anywhere near the sums proposed by Fox and its legal representatives and transferred the proceedings from the High Court to the IPEC and ordered Fox to pay the Defendants their legal costs.

On 14 February 2019, unhappy with the Master’s decision, Fox appealed the decision on the basis that the damages would be in excess of £500,000. However, this appeal was dismissed by the leading High Court IP judge, Mr Justice Birss who stated that the appeal was “wholly without merit”. This again incurred further unnecessary costs for both parties.

Inquiry as to Damages

In May 2019, shortly after Fox’s failure to resist transfer to the IPEC and despite maintaining that the damages in this claim would exceed £500,000, Fox served its “Points of Claim” (which set out how much damages they are claiming) which added up to a maximum of £72,821.91 plus interest. Given the numbers, this was quite the climb down by Fox.

While this was a world away from Fox’s earlier estimates as to the value of their damages claim, it was still wholly unjustifiable, and the Defendants’ Points of Defence estimated a true damages value of around £8,778.50, which was very close to the repeated valuation the IP experts at Virtuoso Legal had stated from the outset.

Settlement

Once Fox had started to become (a little) more realistic about the value of its damages claim, the parties were able to settle the proceedings in July 2019.

The Defendants agreed to pay Fox the sum of £15,000 in damages, in other words less than 0.03% of the amounts Fox were (at one point) claiming against the Defendants. If only Fox had correctly valued their own claim and engaged with negotiations from the outset, the costs of these proceedings could have been avoided.

Despite incurring significant costs themselves, the Defendants offered to pay £10,000 towards the Claimants’ costs in order to bring this matter to a conclusion. Given Fox’s estimated legal costs on this matter were in excess of £100,000, this is a “drop in the ocean” of the costs incurred by Fox by their own conduct.

As a results-based law firm, the IP experts at Virtuoso Legal would not be able to look our clients in the eye if we had obtained such a result for one of them.

Crowd Justice

CrowdJustice is a crowdfunding platform that enables individuals, groups and communities to come together to fund legal action. It assists Defendants in the position of the present case to be able to resist being bullied into submission.

Given the financial position of the defendants in this case, they have set up a Crowd Justice page in order to assist with them with the paying of their legal costs. Please see here, if you would like to assist!

Conclusions

Philip Partington, director of Virtuoso Legal and head of its disputes department and London Office said:

"These proceedings have been deeply regretful to witness over the last year.

The Defendants clearly made an early set of mistakes in the showing of their version of the Greatest Showman. However, in my view, they were simply naïve in their desire to put on a local theatre production for predominately children, rather than some sort of criminal master mind infringement operation. Unfortunately, Fox did not see the case this way and embarked on a wholly disproportionate set of proceedings.

If Fox had been more reasonable at the outset, these proceedings could have settled within a month, rather than dragging on for almost a year, and in the process risk the closure of a local community theatre and costing Fox well over £100,000. We would hope they (and other similar rights holders) would re-consider this sort of disproportionate approach in the future.

If other local theatres find themselves being bullied by large corporations, I trust they will pick up the telephone and give our team a call.”