ON APPEAL FROM THE COPYRIGHT TRIBUNAL
MR JUSTICE FLOYD
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE WILSON
LORD JUSTICE ETHERTON
| CSC MEDIA GROUP LIMITED (Formerly known as Chart Show Channels Ltd)
|- and -
|VIDEO PERFORMANCE LIMITED
WordWave International Limited
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Ian Mill QC and Mr Tom Weisselberg (instructed by Olswang LLP) for the Respondent
Hearing dates : 13th April 2011
Crown Copyright ©
Lord Justice Etherton :
The legal principles
"129. In determining what is reasonable on a reference or application under this Chapter relating to a licensing scheme or licence, the Copyright Tribunal shall have regard to—
(a) the availability of other schemes, or the granting of other licences, to other persons in similar circumstances, and
(b) the terms of those schemes or licences,
and shall exercise its powers so as to secure that there is no unreasonable discrimination between licensees, or prospective licensees, under the scheme or licence to which the reference or application relates and licensees under other schemes operated by, or other licences granted by, the same person."
"… This is an expert Tribunal charged with administering a complex area of law in challenging circumstances. To paraphrase a view I have expressed about such expert Tribunals in another context, the ordinary courts should approach appeals from them with an appropriate degree of caution; it is probable that in understanding and applying the law in their specialised field the Tribunal will have got it right: see Cooke v Secretary of State for Social Security  EWCA Civ 734,  3 All E R 279 at . They and they alone are the judges of the facts. It is not enough that their decision on those facts may seem harsh to people who have not heard and read the evidence and arguments which they have heard and read. Their decisions should be respected unless it is quite clear that they have misdirected themselves in law. Appellate courts should not rush to find such misdirections simply because they might have reached a different conclusion on the facts or expressed themselves differently."
"I cannot emphasise too strongly that the issue on an appeal from the Tribunal is not whether the appellate body agrees with its conclusions. It is this: as a matter of law, was the Tribunal entitled to reach its conclusions? It is a misconception of the very nature an appeal on a point of law to treat it, as too many appellants tend to do, as just another hearing of the self-same issue that was decided by the Tribunal."
"It cannot be necessary for a Tribunal to mention expressly every relevant matter that has been placed before it in argument or in evidence. Remarks made by Lord Hoffmann in Piglowska v. Piglowski  1 WLR 1360, are apposite. Lord Hoffmann commented that: 'The exigencies of daily court room life are such that reasons for judgment will always be capable of having been better expressed …', and warned that: 'an appellate court should resist the temptation to subvert the principle that they should not substitute their own discretion for that of the judge by a narrow textual analysis which enables them to claim that he misdirected himself'"
"The determination of the amount of the royalty is not the most promising material in which to find an error of law. The jurisdiction of the Tribunal could hardly be expressed in simpler terms. Section 27(4) of the Copyright Act 1956 says that it shall make such order 'as the tribunal may determine to be reasonable in the circumstances'. The Tribunal expressly directed itself in accordance with this provision. It seems to me that it can only have erred in law if it did something which no Tribunal, if it thought about the matter, could have regarded as reasonable. Irrationality could in theory be demonstrated in two ways. First, the royalty fixed by the Tribunal might be so large or so small that no rational Tribunal could have arrived at such a figure… Secondly, the reasons given by the Tribunal … might disclose some non sequitur which invalidates the reasoning."
"Many of the questions faced by the Tribunal are of fact and degree, for instance whether a prior agreement or decision of the Tribunal can be used as a comparator for the case in hand. Adapting the words of Lord Simon of Glaisdale in the tax case of Ransom v Higgs  STC 359 at 561:
'There lies a "no man's land" of fact and degree where it is for the Tribunal to evaluate whether the prior agreement or decision is an appropriate comparator or not. The court can only interfere where the degree of fact is so inclined towards one frontier or the other as to lead it to believe that there is only one conclusion to which the Tribunal could reasonably have come.'"
"In some fields, identifying a sum as "reasonable remuneration" will not be particularly difficult or susceptible of much scope for differing views. Payment of reasonable remuneration for a standard piece of work done by a craftsman or a member of a profession is an example. In other fields the matter will stand very differently. This is so with licences of right. The complexities and uncertainties involved in cases such as the present appeals are formidable. In such cases the exercise is bound to be one in the carrying out of which different minds may readily reach differing conclusions, according to the weight which different minds consider ought fairly to be given to the various features of the case. An example of this is the extent to which rival comparables advanced by SK&F and the applicants assist in the present case. Inevitably there are points of resemblance and points of distinction in almost all comparables. The weight to be attached to these various points, and the conclusion on the degree of assistance a particular comparable affords, are matters which lie in the judgment of the tribunal to whom the calculation has been entrusted."
"Commercial radio and music videos are rather different products and royalties payable to licensing bodies under commercial radio broadcasting agreements have, we consider, only a modest bearing on the major issues to be decided here."
"67: Comparators As noted above, s.129 of the Act requires the Tribunal to take into account schemes and licenses 'to other persons in similar circumstances.' Mr Richard Boulton, an expert who has frequently given evidence before the Tribunal, put the position with great clarity, thus [in the 2007 Joint Online Licence reference]:
The comparable royalties approach is often regarded as the best approach to use in circumstances where the parties do not agree on the level of royalty. Negotiations between a willing licensor and a willing licensee, in the circumstances, will provide, in theory the best available information about the level of a reasonable royalty. "
"68. In AIRC v PPL the Tribunal stressed the importance of comparators:
'It is for the Tribunal in assessing the transactions cited as comparable to decide to what extent the rights licensed are of the same or a similar kind, whether the transactions were concluded at arm's length with neither side affected by stress, and whether they were affected by legal factors which do not apply in this case. It is then for the Tribunal to adapt any relevant comparators to the case under review.' [Emphasis added]
69. Thus, starting with a cited comparator, it is open to the Tribunal to take notice of it (or of parts of it) and to use it (or reject it entirely) as the case may require. The authorities show that whilst the utility of comparators has frequently occupied the Tribunal's time, in practice they appear to have been more of a legitimate quarry (or template) for particular terms and figures rather than as full precedents for a particular license.
70. On the issue of royalty rates, comparators have featured strongly in the arguments of VPL reliance being placed upon the antecedent licensing of the same rights to CSC (e.g. in the 2003 License) and to others. Comparators have also featured in the case of CSC in respect of the rates charged by PPL for its standard commercial radio licenses. Not surprisingly VPL characterised the 2003 License as being 'a compelling comparator'.
71. When one is dealing with the licensing of 'similar' rights, some comparators may be more relevant than others. For example, in cases where the exploitation of music requires licenses both from the owners of the rights in the music videos (i.e. VPL) and that of the owners of the rights of the composers and publishers of music (i.e. PRS for music), the Tribunal has held that (a) these two types of rights are legitimate comparators, and (b) there is no reason to treat one as being qualitatively superior to the other.
72. Where there are sufficiently comparable licenses, the Tribunal should adopt a similar rate "absent any special circumstances": AEI v PPL supra at 256.
73. Finally, this must be said of comparables: though the Tribunal may impose different rates upon different parties in respect of essentially the same rights, it must not thereby discriminate between licensees (see above para 62) unless there is "a logical reason for it"."
"a long shadow must fall over the very existence of VPL's so-called Standard Licensing Approach… We accept the fact of its 'imposition' by VPL in the case of nominal users of the Repertoire; but this does not elevate it to the status of in effect, a tariff."
"133. … In the circumstances, we consider that a detailed analysis of the evidence on this topic is not required because the main point being made by CSC is a very general one and it is this: both offerings are driven by music and in the case of commercial radio, the rates are assumed to have been the outcome of arm's length negotiation and agreement. How can music video therefore reasonably be said to be worth four times that of commercial radio?
134. Music videos are a genre of entertainment independent of others; these are not fungible products. The music video is obviously worth more than commercial radio as a licensable commodity. But how much more?
135. Every product has its price. By now, as a result of both the evidence and the demonstration, we have had enough experience of music videos to form a prima facie view of their worth in the hierarchy of entertainment. In our view, VPL's demand for four times the maximum headline rate for commercial radio is unreasonable. The rate must be less than 20% of defined revenue on this ground alone. At the other end, the highest figure emerging from this evidence on commercial radio is possibly, 5.75% and we may therefore take this sum as the lower starting point. The CSC has proposed its 8% royalty with inter alia this in view, believing it to be generous. We think that the figure should be more than that."
"136. Taking this, the 'pop promo effect' and the evidence relating to a changing market into account, we consider that the right royalty rate must be over 10% and less than 15%. The rest is fine tuning - to which we now turn.
137. There are two main areas by which to fix the thus diminished window of royalty rate:
(a) Consideration of other music video licenses as comparables, and
(b) The 'available profits' approach."
"160. The second license which was agreed in July 2004 spanned the period covering the sale of the BSkyB channels to CSC. It was signed only in 2007, just after the sale. The relevant part of this agreement shows that BSkyB agreed to pay 20% of all revenue streams with pro-ration to take place only in the event that more than 20% of programming content (i.e. airtime less promotions, station 'idents' etc) comprised non-VPL material. There was also to be a quarterly refundable advance of £16,000. On its face therefore this was an example of the 20% license in a deal struck with a major player in the field. What better example do you want asked Mr Hollander rhetorically?
161. In answer, Mr Baldwin again went for the figures available from disclosure and was able to show that whatever the agreement provided, the figures of royalty paid did not square with the 20% royalty agreed. They were less. As with Box, possible 'wrinkles' were located in whether or not certain sums had been pro-rated or not and it is right to say that Mr Clark (who was asked many questions on the workings of this agreement) was defensive rather than helpful on the matter: see T10/31. On the other side Mr MacMillan who was also cross-examined about BSkyB was unable to provide full answers: T7/113-114 and 145-147. No one from BSkyB was called. There is thus some uncertainty about the workings of the agreement – but none about its terms.
162. CSC also suggested that by the time the agreement was signed, BSkyB wanted to have nothing more to do with their music video debacle which they had witnessed and disposed of – and were just no longer interested. We find this an unconvincing argument.
163. In our view, the BSkyB agreement is an example of the Standard Licensing Approach being accepted with a major player."
"187. Whilst we feel that both sides may have exaggerated their fortunes and misfortunes past and present, under this head, on any account we are certainly not looking at a rosy picture of untrammelled growth in CSC's fortunes on foot of its music video business ..."
"We have decided in the light of the foregoing that the reasonable royalty rate should be 12.5% of CSC's Gross Revenue subject to the proposed deductions in respect of advertising etc. The various other changes to VPL's 2008 Offered License may be derived from our findings above."
The Judge's judgment
"It is well established that, if the Tribunal is satisfied that there exist other licences which are sufficiently comparable to the licence they are going [semble to be] asked to settle, the Tribunal should adopt a similar rate absent any special circumstances. (See section 129 of the Act, Smith Kline & French Ltd's (Cimetidine) Patents and British Phonographic Industry Ltd v Mechanical Copyright Protection Society Ltd (No 2) (BPI v MCPS). Thus had there been a number of pre-existing licences for satellite broadcast background music which the Tribunal had either settled, or was satisfied had been entered into consensually by parties with equal bargaining power, the Tribunal would adopt similar if not identical rates and conditions."
"That approach involves starting with the most relevant comparable and adapting it to the circumstances of the present case. It seems to me that the almost inevitable consequence of adopting the Tribunal's approach in the present case is that the comparable will be given insufficient weight. Accordingly, in my judgment, the Tribunal has fallen into error here. Although the Tribunal clearly set out to apply the statutory obligation to have regard to comparables in general, the two stage process which it applied has prevented it from doing so. "
The Respondent's notice
"21. We believe that the original promotional effect is still present; the notoriety of the artistes involved is bound to be of downstream benefit to those who feature on music videos. Moreover, CSC are substantial users of the Repertoire. In this case (like VPL did in the past), we therefore consider it reasonable to apply a reduction to VPL's headline 20% royalty so as to take account of the ongoing 'pop promo effect' of the Repertoire ..."
"127. In our view, the first effect of this evidence is greatly to diminish the value of the older licence agreements with VPL as comparators. In this regard, it is difficult to know where to draw the line with any degree of certainty particularly as one was in any event dealing in those early days with an immature market. We have decided therefore to place less value on agreements with VPL which were made before January 2005. The effect of declining advertising is of course ongoing and account must also be taken of that too. In any event, this change will be reflected in the royalty again being reduced from the proposed headline figure of 20% of defined advertising revenue (see below)."
"where close comparables exist, they provide by far the best and surest approach. There is no better guide to what a willing licensor and a willing licensee would agree than what other licensors and licensees have in fact agreed in comparable cases".
"we have had enough experience of music videos to form a prima facie view of their worth in the hierarchy of entertainment"
Postscript: seeking clarification of decisions of the Tribunal
Lord Justice Wilson
Lord Justice Longmore