Sony Music Entertainment (Ireland) Ltd & Ors v UPC Communications Ireland Ltd

Factual and Procedural Background

The plaintiffs, as copyright holders, initiated proceedings against the defendant, a non-infringing internet service provider ("ISP"), seeking an injunction pursuant to section 40(5A) of the Copyright and Related Rights Act 2000, as amended, implementing Article 8(3) of Directive 2001/29/EC. The High Court granted an injunction with certain orders, which were upheld on appeal to the Court of Appeal. Following the substantive judgment, a hearing on costs was held. The High Court ordered that the plaintiffs recover 60% of their costs up to the date of the substantive judgment and that thereafter each party bear its own costs. This judgment concerns an appeal and cross-appeal against that order for costs and one issue relating to the costs of the appeal itself.

Legal Issues Presented

1. Whether the High Court erred in awarding the plaintiffs 60% of their costs despite the defendant being a non-infringing intermediary and the novel and complex nature of the proceedings.
2. Whether the novelty and test case nature of the proceedings justified a departure from the general rule that costs follow the event.
3. Whether the costs of the appeal should be awarded on an indemnity basis rather than the usual party/party basis.

Arguments of the Parties

Plaintiffs' Arguments

• The plaintiffs succeeded in their substantive claim for an injunction which was resisted by the defendant.
• There was no justification to depart from the normal rule that costs follow the event.
• The trial judge erred in considering the novelty and complexity of the proceedings as special circumstances justifying a reduction in costs awarded.
• In litigation between private parties, the test case nature of the proceedings does not warrant departure from the ordinary costs rule.
• The costs of the appeal should be awarded on the usual party/party basis and not on an indemnity basis.

Defendant's Arguments

• The trial judge failed to properly consider special circumstances justifying no order for costs in favour of the plaintiffs.
• The defendant is a non-infringing internet service provider who committed no legal wrong.
• The defendant succeeded on many issues, and the injunction granted was substantially different from the relief sought.
• The novelty of the legal issues and the test case nature of the proceedings justified a greater reduction in costs awarded to the plaintiffs.
• Regarding appeal costs, the defendant argued that the High Court's cost sharing order was an improper exercise of jurisdiction and sought indemnity costs on that basis.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court exercised its appellate jurisdiction over the discretionary costs order made by the High Court, recognizing the need to give great deference to the trial judge’s discretion absent detectable errors. The Court considered the nature of the proceedings, which involved an injunction against a non-infringing intermediary under a statutory regime implementing EU law. It rejected the defendant’s characterization of itself as an "innocent intermediary" as a special circumstance justifying a departure from the normal costs rule.

The Court distinguished these proceedings from Norwich Pharmacal applications, emphasizing that the present case was an adversarial proceeding where costs ordinarily follow the event. It acknowledged the novelty and complexity of the issues, including the worldwide context of internet piracy and differing national legislative responses, but found that such novelty alone did not constitute a special circumstance warranting a costs departure.

Regarding the test case nature, the Court agreed with established authority that this does not, in itself, justify departing from the general costs rule between private parties. The trial judge’s approach, awarding the plaintiffs 60% of their costs to reflect their success on the main issue but recognizing the defendant’s success on other issues, was upheld. The Court emphasized the importance of clearly indicating the proportion of costs attributable to issues won by the losing party to allow proper assessment and appellate review.

On the issue of appeal costs, the Court rejected the plaintiffs' submission for indemnity costs, finding no basis to depart from the usual party/party costs order. The defendant’s conduct in making alternative submissions did not warrant indemnity costs.

Ultimately, the Court found no error in the High Court’s exercise of discretion and concluded that the interests of justice did not require interfering with the costs orders.

Holding and Implications

The Court DISMISSED both the appeal and the cross-appeal concerning the costs order. The plaintiffs were awarded the costs of the appeal on the usual party/party basis, not on an indemnity basis.

The decision confirms that in adversarial proceedings against non-infringing intermediaries under the statutory regime implementing EU copyright directives, the normal rule that costs follow the event applies. Novelty and test case status do not, without more, justify departing from this rule in private litigation. The ruling underscores the importance of careful apportionment of costs where parties succeed on different issues. No new precedent was established beyond affirming established principles of appellate discretion and costs allocation.