COPYRIGHT TRIBUNAL OF AUSTRALIA
Australasian Performing Right Association Limited and Australasian Mechanical Copyright Owners Society Limited [2009] ACopyT 2
Copyright Act 1968 (Cth), ss 136, 152, 154
CT 1 of 2007
THE TRIBUNAL: EMMETT J (PRESIDENT), PROFESSOR DENNIS PEARCE (MEMBER), DR HUGH SIBLY (MEMBER)
17 DECEMBER 2009
SYDNEY
| COMMONWEALTH OF AUSTRALIA Copyright act 1968
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| IN THE COPYRIGHT TRIBUNAL | CT 1 OF 2007 |
REFERENCE BY:
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| AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED AND AUSTRALASIAN MECHANICAL COPYRIGHT OWNERS SOCIETY LIMITED
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| THE TRIBUNAL: | EMMETT J PresIDENT PROFESSOR DENNIS PEARCE (MEMBER) DR HUGH SIBLY (MEMBER) |
| DATE OF ORDER: | 17 december 2009 |
| WHERE MADE: | SYDNEY |
THE TRIBUNAL ORDERS THAT:
1. The Licence Scheme annexed to this order be confirmed pursuant to s 154(4) of the Copyright Act 1968 (Cth).
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.
APRA|AMCOS DIGITAL MUSIC SERVICE AGREEMENT 2009
THIS AGREEMENT IS MADE ON
PARTIES
AUSTRALASIAN MECHANICAL COPYRIGHT OWNERS SOCIETY LIMITEDABN 78 001 678 851 of 16 Mountain Street, Ultimo, New South Wales on its own behalf and on behalf of each of the AMCOS Members (AMCOS)
AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED
ABN 42 000 016 099 of 16 Mountain Street, Ultimo, New South Wales (APRA)
YOUR DETAILS
Registered Company Name:.................................................................................... (You)
ABN:...................................................................................................................................
Trading Name:....................................................................................................................
Street Address:...................................................................................................................
Postal Address (if different):..............................................................................................
Main Contact:.....................................................................................................................
Contact's Title:...................................................................................................................
Contact's Email Address:...................................................................................................
Contact's Phone Number:..................................................................................................
Contact's Fax Number:......................................................................................................
BACKGROUND
A. AMCOS and APRA are mechanical right and performing right collecting societies respectively.
B. AMCOS is the exclusive licensee in the Territory of the right to reproduce the AMCOS Works in certain circumstances.
C. APRA controls in the Territory the right to communicate the APRA Works.
D. You are a provider of Downloads and require a licence from APRA|AMCOS in order to conduct Your Digital Music Service.
E. AMCOS and APRA have agreed to grant licences and make arrangements respectively on the terms of this agreement.
LICENCE
In consideration of payment of the Licence Fees and compliance with the attached terms (Terms), AMCOS and APRA grant You a Licence commencing on the Commencement Date. The Terms are incorporated into this agreement and each party must comply with its obligations under them.
SIGNED AS AN AGREEMENT
| Signed byAustralasian Mechanical Copyright Owners Society Limited:
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| Signed byAustralasian Performing Right Association Limited:
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DIGITAL DOWNLOAD TERMS
1. Subject matter and grant of rights
1.1 Entire agreement
This agreement, and the Terms, including the schedules, contain the entire agreement between APRA|AMCOS and You relating to the reproduction of AMCOS Works and the communication of APRA Works as part of Your Digital Music Service.
1.2 Grant of rights
Subject to clause 1.3 and on the Terms, APRA|AMCOS grants You a Licence.
1.3 Exclusions and limitations
1.3.1 The Licence is conditional on Your compliance with the Terms, subject to the right to Cure, including provision of Sales Reports and payment of Licence Fees.
1.3.2 Nothing in this agreement constitutes the grant of a licence to reproduce a Work that is not an AMCOS Work.
1.3.3 Nothing in this agreement constitutes the grant of a licence to communicate a Work that is not an APRA Work.
1.3.4 This agreement does not apply to reproductions of Works made, sold, distributed or communicated by You or on Your behalf with the intention of, or with Your expressed or implied authorisation for, use other than as part of Your Digital Music Service.
1.3.5 The Licence does not include the right to synchronise AMCOS Works with audiovisual material, including Music Videos, or still images.
1.3.6 The Licence does not include the right to reproduce or communicate to the public any Work in a manner that represents that particular Works or groups of Works identified by songwriter or title are associated with or promotes the sale or provision of any goods or services.
1.3.7 The Licence does not include the right to reproduce AMCOS Works or communicate APRA Works as part of a Subscription Service.
1.3.8 The Licence does not include the right or authorise:
(a) the reproduction of any Work into an Advertisement;
(b) the reproduction or communication of any Work in circumstances where there is consideration for the Download or the right to receive the Download, that does not consist wholly of money;
(c) the reproduction or communication of any Work as a ringtone;
(d) the making of an adaptation or a parody of an AMCOS Work;
(e) the reproduction or communication of any Work with words that are not approved or normally associated with the Work by the copyright owner for Australia;
(f) the reproduction or communication of any Works in a graphic form;
(g) the performance in public of any Works;
(h) the performance in public or communication to the public of any Grand Right Works in their entirety, unless the communication is of a commercially released soundtrack album of a theatrical production or a cinematograph film of Grand Right Works;
(i) the performance in public or communication to the public of any choral work of more than 20 minutes' duration in its entirety, unless the communication is of a commercially released soundtrack of such a choral work;
(j) the reproduction, performance in public or communication to the public of any sound recording; or
(k) any other right not expressly granted under this agreement.
1.3.9 Nothing in the Terms constitutes a consent by the authors of Works in relation to any act contrary to the author's moral rights.
1.3.10 If APRA|AMCOS notifies you in accordance with clause 3.4 that a Work is no longer an APRA Work or an AMCOS Work for the purposes of this agreement, You will cease to be licensed under this agreement in respect of the reproduction or communication of the Work (as the case may be), from the date specified in the notice.
1.4 Term
(a) This agreement commences with effect from Commencement Date and, subject to earlier termination in accordance with clause 7, will continue until terminated by either party on 3 months' notice, such termination not to be effective before 31 December 2014.
(b) Following termination on giving notice under clause 1.4(a), if You still require a licence from APRA|AMCOS for Your Digital Music Service and the parties have not agreed on the terms of that future licence, then the terms of this agreement will remain in force pending such agreement, or a determination by or other order of the Copyright Tribunal, as to the terms of the licence.
1.5 Licence Fees
1.5.1 You must pay APRA|AMCOS the greater of:
(a) the following percentages of the Retail Price:
| Downloads other than Music Videos | Music Videos |
| 9% (exclusive of GST) | 8% (exclusive of GST) |
or
(b) the Track Rate.
1.5.2 Notwithstanding anything contained in this agreement, You are not required to pay Licence Fees under this agreement, and You will be entitled to a Rebate where either, APRA or AMCOS (as the case may be) is reasonably satisfied, or You can demonstrate to the reasonable satisfaction of APRA or AMCOS (as the case may be), or You can otherwise establish that:
(a) the Work is a Work in which copyright does not subsist;
(b) the Work is not an AMCOS Work, including because a prior licence has been obtained for the reproduction of the Work on Your Digital Music Service; or
(c) the Work is not an APRA Work, including because a prior licence has been obtained for the communication of that Work on Your Digital Music Service,
such Rebate to be paid at the earliest practical opportunity consistent with the standard business practice of APRA or AMCOS (as the case may be) or within 6 months, whichever is the earlier.
1.5.3 For each Accounting Period the total of the Licence Fee referred to in clause 1.5.1 must be adjusted by deducting the net Licence Fee paid or payable on Fraudulent Transactions and adding the net Licence Fee payable on Fraudulent Transactions subsequently recovered, reported in that Accounting Period.
1.6 Free Downloads
1.6.1 No Licence Fee is payable on Promotional Downloads.
1.6.2 From 1 January 2012, APRA|AMCOS may review the Code and, on 3 months' notice, issue a revised Code. If You object to the Code, clause 6 applies and the new Code will not come into effect until the dispute is resolved.
1.6.3 If You do not object to the revised Code within the 3 month notice period, the revised Code will come into effect in accordance with the notice.
2. Your obligations
2.1 Sales Reports
2.1.1 You must account to APRA|AMCOS for all transactions that are the subject of the Terms for each Accounting Period in accordance with this clause 2.1.
2.1.2 You must deliver a Sales Report to APRA|AMCOS by the Due Date.
2.1.3 Subject to clause 21.5, each Sales Report must be, at your election, either in DDEX, APRA|AMCOS' current EDI or such other form reasonably required from time to time by APRA|AMCOS and must contain the following details:
(a) information sufficient to identify the Sales Report, including:
(i) Your details (including where applicable any password allocated to You by APRA|AMCOS, Your APRA|AMCOS identification number and Your contact email address); and
(ii) file identification details (including the identification of the Sales Report as a Digital Music Service Sales Report, the transmission date of the file and the number of records in the file);
(b) information sufficient to separately identify each Sales Batch in the Sales Report, including:
(i) the Accounting Period start and end date; and
(ii) the type of Download;
(c) in respect of each Track in each Sales Batch:
(i) title of the Work (or Works in the case of Medleys);
(ii) subject to clause 2.1.6, songwriter(s) of the Work(s) or ISWC;
(iii) name of the artist or band that recorded the version of the Work reported (or has been used by You to identify the Work);
(iv) subject to clause 2.1.6, if indicated on the Track, or requested by APRA|AMCOS, the APRA work identifier, ISWC, ISRC and the name of record label that provided the digital master recording;
(v) the number of units Sold at each Retail Price (including where free) and the Retail Price (in Australian dollars);
(vi) the type of Download; and
(vii) whether You have a direct licence from a relevant member of APRA or AMCOS;
(d) in respect of each Bundle in each Sales Batch:
(i) title of the Bundle;
(ii) name of the artist or band that recorded the Bundle reported (or “various” if the Bundle is a compilation recording);
(iii) if relevant, the name of the record company that provided You with the Bundle and that record company's catalogue number or UPC for the Bundle;
(iv) the number of units Sold at each Retail Price (including where free) and the Retail Price (in Australian dollars);
(v) the type of Download;
(vi) the number of tracks on the Bundle; and
(vii) whether You have a direct licence from a relevant member of APRA or AMCOS.
2.1.4 In respect of each Bundle included by You in a Sales Report that is not matched to an existing production on APRA|AMCOS's database, APRA|AMCOS may request in electronic or such other form reasonably required from time to time by APRA|AMCOS, the following details in respect of each Track on that Bundle:
(i) title of the Work (or Works in the case of Medleys);
(ii) subject to clause 2.1.6, songwriter(s) of the Work(s);
(iii) name of the artist or band that recorded the version of the Work reported (or has been used by You to identify the Work);
(iv) the track number;
(v) subject to clause 2.1.6, if indicated on the Track, or requested by APRA|AMCOS, the APRA work identifier, ISWC, ISRC and the name of record label that provided the digital master recording;
(vi) whether You have a licence from an owner of the copyright in the Work or under a direct licence from a relevant member of APRA; and
(vii) whether the Work as recorded is a local cover of a foreign work.
2.1.5 On entering into this agreement, You must notify APRA|AMCOS of the reporting format elected by You in accordance with clause 2.1.3, and thereafter if you intend to change to that reporting format, clauses 2.7.2 to 2.7.4 apply.
2.1.6 You are required to provide the information in clauses 2.1.3(c)(ii), 2.1.3(c)(iv), 2.1.4(ii) and 2.1.4(v) only to the extent that such information is in Your possession.
2.1.7 You must use reasonable endeavours to obtain the information referred to in clause 2.1.6 from the supplier of the relevant Track or Bundle.
2.2 Failure to provide relevant or accurate statements
2.2.1 If You fail to comply with clause 2.1, and have failed to Cure, APRA|AMCOS may reasonably estimate Sales and music use information, including any relevant previous information provided by You, for the purpose of issuing a tax invoice for a Provisional Payment.
2.2.2 If You fail to comply with clause 2.1 in respect of any Accounting Period to an extent that APRA|AMCOS cannot reasonably identify the Works sold:
(a) in respect of more than 20% of the value of Sales reported; or
(b) in a manner such that APRA|AMCOS cannot reasonably process more than 50% of the Tracks or Bundles (as the case may be) Sold,
APRA|AMCOS may decline to issue a tax invoice to You under clause 3.1.1, in respect of the unidentified Works, and clause 3.3 will not apply in respect of the unidentified Works until such time as APRA|AMCOS is reasonably satisfied that You have complied with clause 2.1.
2.3 Payment of Licence Fees
2.3.1 You must pay Licence Fees to APRA|AMCOS within 21 days after receipt of a tax invoice from APRA|AMCOS.
2.3.2 If You are notified of late payment and have failed to Cure, You must pay interest at the Agreed Rate on any amount that remains unpaid from the date of expiry of the right to Cure until the date of payment.
2.3.3 You acknowledge that the information contained in Sales Reports is critical to the calculation and distribution of Licence Fees by APRA and AMCOS to their respective members.
2.3.4 If You fail to provide a Sales Report in accordance with the Terms, and APRA|AMCOS notifies You that the Sales Report has not been provided, You must pay interest at the Agreed Rate calculated from 28 days after the Due Date on amounts that would have become payable had the reports been provided.
2.4 Provisional Payment
2.4.1 If the amount of Licence Fees payable in any Accounting Period exceeds the Provisional Payment, You must pay the excess to APRA|AMCOS within 21 days after the date of the tax invoice.
2.4.2 If the amount of the Licence Fees payable in any Accounting Period is less than the Provisional Payment, APRA|AMCOS must credit the amount to Your account within 21 days after the date of the tax invoice.
2.5 Security
2.5.1 Before the Commencement Date or at any time during the term of this agreement, if:
(a) You are a new client of APRA|AMCOS;
(b) You have a credit history that reasonably justifies concern on the part of APRA|AMCOS that You may fail to pay Licence Fees in accordance with this agreement;
(c) You have been repeatedly late in paying Licence Fees under this or another APRA|AMCOS licence agreement, whether or not You have remedied the breach; or
(d) Your business is not registered or has no obvious presence in Australia (as the case may be);
if required by APRA|AMCOS, You must give APRA|AMCOS Security as security for performance of Your obligations under this agreement.
2.5.2 The Security will be calculated by APRA|AMCOS based on a reasonable estimate of the amount of Licence Fees payable for any Accounting Period.
2.5.3 If required by APRA|AMCOS, the amount of the Security may be increased proportionally with any increase in the amount of Licence Fees payable under clause 1.5.
2.5.4 APRA|AMCOS may use the Security to recover any loss or expense APRA|AMCOS incurs due to a breach of this agreement by You.
2.5.5 If any part of the Security has been used by APRA|AMCOS under clause 2.5.4, You must replace that part of the Security within 5 business days of notice by APRA|AMCOS that it has used the Security.
2.5.6 Upon the termination of this agreement APRA|AMCOS must promptly return to You any part of the Security not needed to recover an expense or loss of APRA|AMCOS.
2.6 Records
You must keep proper records relating to Your Digital Music Service including but not limited to accounting records, which must be maintained to a standard sufficient to enable an audit trail to be established relating to Sales such that there are at least two sources of data from which your Sales can be verified, provided that the auditor's right to inspect such documents is limited to documents that are reasonably required and are relevant to the audit. Such documents may include monthly source log files and backup tapes or similar historical records.
2.7 Training and upgrades
2.7.1 APRA|AMCOS may provide You with notice from time to time of updates, revisions, amendments or other changes to the Sales Report formats.
2.7.2 Any notice referred to in clause 2.1.5 or 2.7.1 must be:
(a) reasonable in the circumstances; and
(b) allow the recipient of the notice reasonable time to make adjustments and implement the updates, revisions, amendments or other changes to the recipient's current systems.
2.7.3 If a party disputes the reasonableness of matters notified in accordance with clause 2.1.5 or 2.7.1 (as the case may be), clause 6 applies.
2.7.4 If a party receiving a notice does not notify the other party of a dispute under clause 2.7.3 within 2 months of receiving notice under clause 2.1.5 or 2.7.1, the updates, revisions, amendments or other changes the subject of the notice will take effect from the date specified in the notice.
3. Obligations of APRA|AMCOS
3.1 Tax invoices
3.1.1 On receipt of Sales Reports, or where clause 2.2.1 applies, APRA|AMCOS must each issue a tax invoice to You showing the total Licence Fees or the Provisional Payment payable for the Accounting Period.
3.1.2 If GST is payable for a taxable supply made under this agreement, then any party (Recipient) that is required to provide consideration to another party (Supplier) for that supply must pay an additional amount to the Supplier equal to the amount of that GST at the same time as any other consideration is to be first provided for that supply, subject to the Supplier providing a tax invoice to the Recipient in respect of that supply.
3.1.3 APRA|AMCOS will provide, when requested by You, an electronic statement in respect of each tax invoice issued under clause 3.1.1 after the date of APRA|AMCOS receiving the request.
3.1.4 Any payment or reimbursement required to be made under this agreement that is calculated by reference to a cost, expense, or other amount paid or incurred will be limited to the total cost, expense or amount less the amount of any input tax credit to which an entity is entitled for the acquisition to which the cost, expense or amount relates.
3.1.5 Terms used in this clause 3.1 that have a defined meaning in the GST law shall have the same meaning given to those terms in the GST law unless expressly stated otherwise.
3.1.6 Any part of a supply that is treated as a separate supply for GST purposes (including attributing GST payable to tax periods) will be treated as a separate supply for the purposes of this clause 3.1.
3.1.7 Unless otherwise expressly stated, all consideration to be provided under this agreement is exclusive of GST. Any consideration that is specified to be inclusive of GST must not be taken into account in calculating the GST payable in relation to a supply for the purposes of this clause 3.1.
3.2 Disputed ownership of Works
3.2.1 If a third party not being a Member approaches You and claims the right to receive licence fees payable in relation to a Work:
(a) You must notify APRA|AMCOS in writing within 7 days of such claim and advise the third party to make a written application to APRA|AMCOS to investigate the claim for ownership; and
(b) within 28 days of receipt of Your notification APRA|AMCOS must advise You whether the relevant rights in the Work are:
(i) controlled by a Member;
(ii) controlled by the third party claiming the right, in which case APRA|AMCOS must repay monies paid in respect of the Work to You at the earliest practical opportunity consistent with the standard business practice of APRA or AMCOS (as the case may be) or within 6 months (whichever is the earlier), or provide You with a Rebate; or
(iii) claimed by two or more persons, one or more of whom is a Member, in dispute, in which case APRA|AMCOS will hold the monies in a dispute account until such time as the matter is resolved.
3.2.2 In the case of rights described in clause 3.2.1(b)(iii), APRA|AMCOS will continue to issue tax invoices in respect of Your use of the Work until such time as the matter is resolved.
3.3 Indemnity
3.3.1 Subject to clauses 2.2.2 and 3.3.3, APRA|AMCOS will indemnify and keep You and any Affiliate authorised by You in accordance with this agreement harmless from any and all damages, losses, costs (including reasonable legal fees and court costs) and expenses incurred, suffered or expended by You as a consequence of any claim of copyright infringement in respect of Your exercise of the Licence, or the exercise of those rights in respect of any other Work where APRA|AMCOS has not previously given you effective notice under clause 3.4.2 in respect of the Work that it is not an AMCOS Work or APRA Work (as the case may be).
3.3.2 You must promptly notify APRA|AMCOS of any claim under clause 3.3.1.
3.3.3 The indemnity in clause 3.3.1 is subject to:
(a) You providing all reasonable assistance reasonably requested by APRA|AMCOS in relation to the claim; and
(b) You agreeing to APRA|AMCOS having sole control and conduct of the defence of such claim,
and does not apply in relation to any Work for which a Rebate has been given from the date of the Rebate until such time as the Work becomes an APRA or AMCOS Work (as the case may be).
3.3.4 The indemnity in clause 3.3.1 is a continuing obligation, separate and independent from the other obligations of the parties, and survives termination, completion or expiration of this agreement.
3.4 Notice of changes in repertoire
3.4.1 APRA or AMCOS (as the case may be) must notify You of any Works that cease to be APRA Works or AMCOS Works for the purposes of this agreement, other than by reason of falling into the public domain.
3.4.2 To constitute a notice under clause 3.4.1, it must be effective from a 31 March, 30 June, 30 September or 31 December as specified in the notice and be given at least 14 days before the relevant date.
4. Management of amounts payable
4.1 Fixed Retail Price
For the purpose of determining Licence Fees the amounts will be separately assessed in respect of each Sale at each different Retail Price reported in the relevant Sales Report.
4.2 Fractions of Cents
If the aggregate Licence Fee for any Accounting Period in respect of each separately reported Single-Track Download or Bundle payable under this agreement includes a fraction of a cent:
(a) where the fraction is less than one half of a cent, that fraction will be treated as zero; and
(b) where the fraction is equal to or more than one half of a cent, that fraction will be treated as one cent.
4.3 Medleys and Samples
For the purposes of calculating Licence Fees, a Medley or a Work containing Samples will be taken to be one Work.
4.4 Currency Conversion
4.4.1 All payments under this agreement must be made in Australian currency. Where any payments are stated to be in any other currency, You must pay APRA|AMCOS in Australian currency at the mid-point of the buying and selling rate published by the Reserve Bank of Australia on the last Business Day of the Accounting Period, and if the Accounting Period is longer than a month, the average from the last Business Day in each month in the Accounting Period.
4.4.2 APRA|AMCOS will issue tax invoices in respect of Sales in currencies other than Australian currency in accordance with clause 4.4.1, and You are responsible for all costs of conversion and remittance, including bank charges.
5. Rights of AMCOS and APRA
5.1 Audit
5.1.1 Subject to clause 5.1.2, APRA|AMCOS may on 30 days' notice to You during Your normal business hours at Your principal place of business in Australia appoint a nationally recognised independent accountant or auditor (licensed by the appropriate authority, not being the auditor of a competitor of Yours and not compensated on a contingency fee basis) who is approved by You, such approval not to be unreasonably withheld, to examine Your records to:
(a) determine the correctness of any notice or payment supplied or made under this agreement or any previous licence agreement for Downloads for the period since any previous audit or 6 years, whichever is the lesser; or
(b) in the case of a failure by You to provide information in accordance with clause 2.1, to obtain information required to be provided under that clause.
5.1.2 APRA|AMCOS may only exercise this audit right once every 2 years.
5.1.3 You must pay the reasonable cost of the audit or examination if it:
(a) establishes that the information provided by You resulted in the amounts payable under the Terms being understated by more than 7.5%;
(b) establishes that You have not kept the records required pursuant to clause 2.6; or
(c) is undertaken under clause 5.1.1(b).
5.1.4 After an audit or examination has been conducted, APRA|AMCOS must direct the auditor to provide a copy of the report to You at the same time as the report is provided to APRA|AMCOS.
5.1.5 Subject to clause 5.1.6, You must pay any moneys determined by the auditor or agreed between the parties to have been payable but unpaid under this agreement, and any amount payable under clause 5.1.3, within 21 days of receipt of a tax invoice from APRA|AMCOS.
5.1.6 If You dispute the findings of the auditor:
(a) You must notify APRA|AMCOS within 28 days of receipt of the report; and
(b) the provisions of clause 6 apply.
6. Dispute resolution
6.1 Disputes
6.1.1 The parties must, during and after the term of the Agreement, without delay and in good faith and at a senior management level, attempt to resolve any dispute which arises out of or in connection with the Terms prior to commencing any proceedings, but failure to do so will not be deemed a breach of the Terms entitling any party to terminate.
6.1.2 Without limiting clause 6.1.1, the parties agree that where the provisions of the Terms would be manifestly unfair to a party, including because You have obtained direct licences from a copyright owner, the parties must attempt to resolve any issue between them by negotiation in good faith.
6.1.3 A party wishing to resolve a dispute must notify the other party of the existence of the dispute and must identify the nature of the dispute in writing. If a dispute under the Terms has not been resolved between the parties within 30 days after notice of the dispute has been given, You may require the dispute to be:
(a) referred to expert determination or resolution in accordance with clause 6.2; or
(b) mediated.
6.1.4 The existence of a dispute or the commencement of proceedings does not affect the obligation of the parties to continue to perform their obligations under the Terms.
6.2 Expert determination
6.2.1 Subject to clause 6.3, disputes under this agreement that have not been resolved in accordance with clause 6.1 may be referred by You to the expert determination procedure offered by APRA in accordance with the terms of its authorisations under the Trade Practices Act 1974 or other dispute resolution mechanism as agreed between the parties.
6.2.2 If a dispute is submitted to expert determination under clause 6.2.1, then a party may not commence proceedings in respect of the dispute unless the dispute is not determined within 30 days of submission to expert determination, or such other time as the parties agree.
6.3 Copyright Tribunal
Nothing in this clause 6 affects the right of any party to seek a determination from the Copyright Tribunal of Australia in relation to the subject matter of this agreement.
7. Termination
7.1 Termination for default
7.1.1 If a party (Defaulting Party):
(a) goes into liquidation, has a receiver or receiver and manager appointed to it or any part of its assets, enters into a scheme of arrangement with creditors or suffers any other form of external administration, or being an individual, commits any act of bankruptcy or enters into a scheme of arrangement with creditors;
(b) fails to Cure a breach of its obligations under the Terms which is capable of remedy; or
(c) materially breaches any of its obligations under the Terms which is not capable of remedy,
the other party may, by notice to the Defaulting Party, terminate this agreement.
7.1.2 If APRA|AMCOS terminates this agreement for breach it may seek to include such additional terms as it believes reasonable to secure performance of Your obligations under any future agreement offered on otherwise the same terms as the Terms.
8. Miscellaneous
8.1 Confidentiality
8.1.1 Subject to clauses 8.1.2 and 8.1.3, APRA|AMCOS must not during or after the term of this agreement (except in the proper course of performance of this agreement), disclose to or authorise the disclosure to any person without Your prior written consent any information provided to APRA|AMCOS under clause 2.1 or 2.2.
8.1.2 With respect to information supplied under clause 2.1 or 2.2, APRA|AMCOS may:
(a) use that information to determine Licence Fees and to distribute money to their respective members; and
(b) provided they first agree to the same obligations of confidentiality contemplated by this clause, disclose that information to APRA|AMCOS' auditors for the purposes of an audit, and other of APRA|AMCOS' professional advisers.
8.1.3 The obligations of confidentiality set out in this clause 8 do not apply to information provided to APRA|AMCOS which is:
(a) required to be disclosed by law; or
(b) in the public domain other than by breach of this clause.
8.2 Notices
All notices required to be given under this agreement must be sent in writing to the parties at the addresses set out in this agreement or to such other address as any party may notify in writing from time to time. Notices may be served by hand delivery, by post, email or by facsimile. Notices served by hand, email or by facsimile will be deemed to have been received on the day of sending. Notices sent by post will be deemed to have been received on the third business day after sending.
8.3 Law of agreement
This agreement must be construed in accordance with the laws for the time being in force in the State of New South Wales.
8.4 Waiver
A waiver by any of the parties of any provision of the Terms will not be deemed or construed as a waiver of such term or condition for the future, or of any subsequent breach. All remedies, rights, undertakings and obligations contained in the Terms will be cumulative and none of them will be in limitation of any other remedy, right, undertaking or obligation of any other party.
8.5 Variation
This agreement may only be varied by the written agreement of the parties.
8.6 Assignment
A party may only assign a right under this agreement with the prior written consent of the other party.
8.7 Severability
If any provision of this agreement is held to be unenforceable, all other provisions shall nevertheless continue in full force and effect.
9. Definitions and interpretation
9.1 Definitions
Accounting Period means each month or such other period as is agreed by the parties;
Act means the Copyright Act 1968 and Copyright Regulations;
Advertisement means any production which is an announcement designed to attract the attention of the public or any part of it to a product or service, person, organisation or line of conduct, including community service announcements and infomercials;
Affiliate means, with respect to a party,any entity which directly or indirectly owns, is owned by or is under common ownership with such party to the extent of at least fifty percent of the equity having the power to vote on or direct the affairs of the entity, and any entity actually controlled by, controlling or under common control with such party;
Agreed Rate means the benchmark rate published by the National Australia Bank Limited plus 2%, calculated at daily rests;
AMCOS Work means a Work in respect of which AMCOS is entitled to administer the right of reproduction, or represents to You that it is entitled to grant a Licence;
APRA|AMCOS means APRA and AMCOS;
APRA Work means a Work in respect of which the right of communication to the public is owned or controlled by APRA for Australia, or APRA represents to You that it is entitled to grant a Licence;
Bundle means a number of Downloads Sold as a single set or album for a single price;
Business Day means a day that is not a Saturday, Sunday or public holiday and on which banks are open for business generally in Sydney;
Clip means a Stream which when played back at normal speed in an uncompressed format on a device is no more than 30 seconds in duration;
Code means the code in schedule 2;
Commencement Date means the later of 1 January 2010 and the date specified in the schedule;
Cure means to remedy a breach of an obligation under the Terms (which is capable of remedy) within 21 days of notice of the breach, or for a breach of a payment or reporting obligation, within 7 Business Days of notice of the breach;
Digital Music Service means the business carried on under the trading names in schedule 1 providing Downloads for Sale;
DJ Mix means a sequence of Tracks mixed together to sound as one continuous track;
Download means a copy of a Track in the form of an electronic file in which sounds are embodied (including a Music Video);
Dual Download means a Download occurring as a result of a single Sale and resulting in more than one copy being delivered by You to a customer to different storage devices;
Due Date means the 30th day after the end of an Accounting Period;
Fraudulent Transaction means the acquisition of a Download made available for Sale by You as part of a deliberate action by an individual or individuals intended to defraud You (such as the compromise of Your security protocols), and where You have referred the matter and the whole dollar amount of that transaction to the police;
Grand Right Work means an opera, operetta, musical play, revue or pantomime insofar as it consists of words and music expressly written for it;
GST has the same meaning as in section 195-1 of A New Tax System (Goods and Services Tax) Act 1999;
ISRC means International Standard Record Code ISO 3901:2001, as amended from time to time by the International Organisation for Standardisation (ISO);
ISWC means International Standard Works Code ISO 15707:2001 as amended from time to time by the ISO;
Licence means a non-exclusive licence to:
(a) reproduce AMCOS Works;
(b) authorise the reproduction of AMCOS Works;
(c) communicate in the Territory the APRA Works (including authorising their electronic transmission from Your Digital Music Service to Your customers);
(d) authorise Your Affiliates to communicate the APRA Works to customers in the Territory as necessary in the course of providing the Digital Music Service,
in the form of Downloads (whether by You, or Your customers in the Territory, onto storage devices) for the purpose of Sale or to complete a Sale, including in the form of Clips provided at no charge for the sole purpose of demonstrating the Clip to customers and potential customers of Your Digital Music Service;
Licence Fee means the fees payable by You under clause 1.5;
Medley means a Track no longer than 8 minutes duration embodying two or more Works, where there is no space between the Works, excluding Samples and DJ Mixes;
Member means a member of APRA or AMCOSas at the date of this agreement and any person who becomes a member of APRA or AMCOS during the term of this agreement;
Music Video means a cinematograph film produced for the primary purpose of promoting or visually representing:
(a) the performer of a sound recording; and/or
(b) the sound recording,
of a Work or Works embodied in the soundtrack of that cinematograph film;
Promotional Download means a Download to which the Code applies;
Provisional Payment means a reasonable estimate by APRA|AMCOS of the Licence Fees;
Rebate means at your election, either a credit to Your account for, or a repayment to You of, an amount equal to all payments by You to APRA and/or AMCOS (as the case may be) in respect of a Work during the period in which any of paragraphs 1.5.2(a) to (c) or 3.2.1(b)(ii) applies;
Retail Price means the selling price of a Download that is advertised to the general public or to Your customers by You or on Your behalf, excluding GST;
Salemeans the sale or supply of Downloads (including supply free of charge) to customers for their personal use on terms that prohibit further supply to third parties;
Sales Batch means, in an Accounting Period, a group of Sales reported by reference to common factors as reasonably required by APRA|AMCOS from time to time;
Sales Report means a statement in accordance with clause 2.1, and which may contain one or more Sales Batches;
Sample means a part of a sound recording of a Work which (along with the accompanying Work) is subsequently embodied in another sound recording;
Security means a bank cheque or unconditional bank guarantee on terms and conditions approved by APRA|AMCOS;
Single-Track Download means a Download comprising one Track (or part of a Track) only;
Streaming means the communication to the public of Tracks and Music Videos (which may or may not be pre-recorded) by means of the internet to a device under circumstances in which the user is prohibited from making a copy of the Track or Music Video;
Subscription Service means a service that supplies Downloads and access to which is made available in return for a periodic payment, or a service that is primarily funded by advertising;
Territory means Australia;
Track means a sound recording of a Work or in the case of Music Videos, the soundtrack (or each part thereof in the case of a long form video) embodying a Work forming part of the film;
Track Rate means in respect of:
(a) a Single-Track Download or a Dual Download
| Downloads other than Music Videos | Music Videos |
| 9 cents (exclusive of GST) | 8 cents (exclusive of GST) |
(b) a Bundle, 6.5 cents (exclusive of GST) for each Track in the Bundle up to a maximum of 65 cents (exclusive of GST) per Bundle, provided the rate per Track is never lower than 2.5 cents (exclusive of GST) per Track;
UPC means Universal Product Code; and
Work means a musical work and any literary work normally associated with it by the copyright owner for Australia, and a reference to a Work includes a reference to a share in any such Work.
Words defined in this agreement have the same meaning in the Terms.
9.2 Interpretation
In the Terms, unless the subject matter or context otherwise requires:
(a) the singular denotes the plural and vice versa;
(b) a reference to one gender includes all other genders;
(c) a person includes an individual, a body corporate and a government;
(d) a reference to a statute, regulation, or provision of a statute or regulation includes a reference to that statute, regulation or provision as amended or re-enacted from time to time;
(e) where a word or expression is given a particular meaning, other parts of speech and grammatical forms of that word or expression have corresponding meanings; and
(f) any word or phrase defined in the Act has that meaning in the Terms unless otherwise defined in the Terms.
Schedule 1
Name of licensee (You)
Trading name(s)
Date of commencement
Schedule 2 – Code
A complimentary Licence applies to all Promotional Downloads providing that:
(a) You nominate the Work embodied in the Download;
(b) they are offered to all customers and potential customers of Your Digital Music Service;
(c) the owner of the copyright in the master sound recording has also granted a complimentary licence is respect of that Download;
(d) the promotion of the Download is limited to no more than 30 days;
(e) no more than five promotions are made available concurrently at any time; and
(f) they are not offered for free as part of a package (for example, “buy one, get one free”) or introductory offer to Your Digital Music Service.
| COMMONWEALTH OF AUSTRALIA Copyright act 1968
| |
| IN THE COPYRIGHT TRIBUNAL | CT 1 OF 2007 |
REFERENCE BY:
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| AUSTRALASIAN PERFORMING RIGHT ASSOCIATION LIMITED AND AUSTRALASIAN MECHANICAL COPYRIGHT OWNERS SOCIETY LIMITED
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|
|
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| TRIBUNAL: | EMMETT J (PRESIDENT) PROFESSOR DENNIS PEARCE (MEMBER) DR HUGH SIBLY (MEMBER) |
| DATE: | 17 december 2009 |
| PLACE: | SYDNEY |
REASONS FOR DECISION
1 This reference is concerned with a proposed licence scheme under s 154 of the Copyright Act 1968 (Cth) (the Copyright Act). The proposed licence scheme relates to the reproduction and communication of musical works and literary works by means of digital music services, including services that offer digital downloads. The proposed licence scheme was referred to the Tribunal pursuant to s 154 of the Copyright Act by Australasian Performing Right Association Limited (APRA) and Australasian Mechanical Copyright Owners Society Limited (AMCOS).
2 Apart from APRA and AMCOS, the parties to the reference are:
· Apple Pty Limited (Apple);
· Sony Music Entertainment Australia Pty Limited (Sony);
· Universal Music Australia Pty Limited (Universal);
· Telstra Corporation Limited (Telstra);
· Australian Competition and Consumer Commission (the Commission).
3 After some seven hearing days, the Tribunal was informed that there was a good prospect of an accord being reached among the parties. The hearing of the reference was therefore adjourned to enable the parties to continue discussion with a view to reaching a final accord. The Tribunal has now been informed that APRA and AMCOS and the digital service providers who are parties have reached agreement and now ask the Tribunal to confirm the proposed licence scheme. The Commission does not oppose confirmation of the proposed licence scheme. Before dealing with the proposed scheme, however, it is desirable to say something about the parties and the statutory framework within which this proceeding has been brought before the Tribunal.
THE PARTIES TO THE REFERENCE
4 APRA is a company limited by guarantee, incorporated under the Corporations Act 2001 (Cth) (the Corporations Act). APRA carries on the activities of a collecting society representing the interests of Australian and foreign composers, authors and publishers of musical works and literary works consisting of song lyrics (the APRA Repertoire). APRA owns or represents the owners of the exclusive right, under s 31(1)(a)(iv) of the Act, to communicate the APRA repertoire to the public throughout Australia. It owns, or represents the owner of, the relevant copyright in practically all musical works and literary works consisting of song lyrics communicated throughout Australia. It does so by way of assignment of the communication right from composers and music publishers and by reciprocal arrangements with overseas collecting societies. Approximately 55,000 Australian composers, authors and publishers of music are direct members of APRA.
5 AMCOS is also a company limited by guarantee incorporated under the Corporations Act. AMCOS carries on the activities of a collecting society representing the interests of music publishers and song writers in Australia, as well as the interests of a number of foreign music publishers and songwriters. AMCOS is the exclusive licensee in Australia of the right of reproduction of musical and literary works owned or controlled by its members or by foreign music publishers and song writers that it represents (the AMCOS Repertoire). AMCOS, on behalf of its members, licenses the reproduction of the AMCOS Repertoire in the form of records, music videos, television programming and other media within Australia.
6 AMCOS is the exclusive licensee in Australia of the “mechanical rights” in copyright works owned or controlled by its members. The “mechanical rights” are a subset of the right to reproduce the work in a material form under s 31(1)(a)(i) of the Copyright Act. AMCOS has approximately 1,700 members, of whom approximately 1,400 are songwriters. AMCOS represents the majority of copyright owners in Australia in respect of the rights that it administers. AMCOS also represents the mechanical rights in a vast number of musical works of foreign origin, either as a result of representation by its music publisher members or through its reciprocal representation agreements with copyright collection societies around the world. Since 2004, AMCOS has admitted songwriters as members.
7 In 1997 APRA took over the administration of licenses issued by AMCOS. Since then, the two companies have operated under the name APRA/AMCOS. APRA and AMCOS together control for the whole of Australia the rights of communication to the public and reproduction in the context of digital downloads in the vast majority of commercially available music. While APRA and AMCOS have separate boards of directors and separate accounts, AMCOS is managed by APRA and employs no staff. APRA and AMCOS maintain a copyright management system, which is a comprehensive data base. The data base contains the ownership information of millions of musical works, including the title and other information in relation to works controlled or partially controlled by one of or both of APRA and AMCOS.
8 Apple is a company deemed to be incorporated under the Corporations Act and is a wholly owned subsidiary of Apple Inc. Apple Inc and its other subsidiaries operate on line iTunes stores in various parts of the world. Apple is responsible for the iTunes store in Australia (iTunes Australia).
9 ITunes Australia, which was launched in October 2005, sells permanent downloads of sound recordings and music videos to customers in Australia who have registered for an iTunes Australia account and installed free iTunes software. iTunes Australia allows its customers to access short excerpts of sound recordings and music videos available for sale through iTunes Australia, to enable customers to verify what they are buying or to explore what is available.
10 Telstra owns and operates a digital music service provider under the name BigPond Music. BigPond Music supplies the product of record companies to members of the public. It charges a fee for that service. Telstra launched its BigPond Music online service in January 2004. It was one of the first digital service providers in Australia. Since the commencement of BigPond Music, a number of digital service providers have started and many have failed. BigPond Music offers digital music to anyone residing in Australia. Currently, BigPond Music offers both single tracks and albums for download from its online service.
11 Each of Universal and Sony is a part of a world wide group of record companies. Each either owns or is exclusive licensee of, and manages the licensing in Australia of, particular copyright in sound recordings contained within the catalogues of their respective international groups. The sound recordings include sound recordings by leading Australian artists, leading international artists and other recording artists. The business of Sony and Universal has traditionally centred around the offering of sound recordings in physical form. Each now offers sound recordings in both physical and digital forms. At present, the lion’s share of the revenue of each of Sony and Universal is still derived from the sales of physical products. However, the material before the Tribunal suggests that relative sales on line are increasing. The same can be said of the industry overall.
12 Sony and Universal are digital service providers. However, they have an additional interest as owners of copyright in relation to records. They are equally affected by piracy in the form of illegal digital downloads. As the owners of copyright in records, they suffer detriment by reason of illegal downloads, which deprive them of the royalties to which they would be entitled as owners of copyright in the records. There are, of course, many other record companies who are affected in the same way as Sony and Universal by unlawful on line downloads.
13 The Commission is an independent statutory authority established under the Trade Practices Act 1974 (Cth) (the Trade Practices Act). In discharging its responsibilities, the Commission works to achieve the objects of the Trade Practices Act, which include the enhancement of the welfare of Australians through the promotion of competition and fair trading and the provision of consumer protection. The Commission has extensive experience in determining economically efficient prices for services supplied by firms with market power, such as natural monopolies. The Commission makes determinations concerning the price of access to some essential services, holds enquiries into the prices of goods and services and provides guidance on the price of access to telecommunication services.
THE RELEVANT STATUTORY FRAMEWORK
14 Under s 31(1)(a) of the Copyright Act, copyright in relation to a literary work or a musical work is, relevantly for present purposes, the exclusive right to do all or any of the following acts:
(i) reproduce the work in a material form;
(ii) publish the work;
(iii) perform the work in public;
(iv) communicate the work to the public.
Section 31 of the Copyright Act specifies when copyright subsists in an original literary work or musical work and s 35 specifies who is the owner of any copyright subsisting in a literary work or a musical work.
15 Under s 36(1) of the Copyright Act, the copyright in a literary work or a musical work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorises the doing in Australia of, any act comprised in the copyright.
16 Division 6 of Part III of the Copyright Act, which consists of ss 54 to 64 inclusive, deals with recording of musical works. Section 55 relevantly provides that the copyright in a musical work is not infringed by a person (the manufacturer) who makes, in Australia, a record of the work if:
· a record of the work has previously been made in, or imported into, Australia for the purpose of retail sale and was so made or imported by, or with the licence of, the owner of the copyright in the work;
· before the making of the record, the prescribed notice of the intended making of the record was given to the owner of the copyright;
· the manufacturer intends to sell the record by retail, or to supply it for the purpose of it being sold by retail; and
· the sale or supply is made with the licence of the owner of the copyright and the prescribed royalty is paid to the owner of the copyright in the manner agreed between the manufacturer and the owner of the copyright or, failing such agreement, determined by the Tribunal under s 152B.
Under 55(6), prescribed royalty, in relation to a record of a musical work, means:
· such amount of royalty as is agreed between the manufacturer and the owner of the copyright in the work, or failing such agreement, as is determined by the Tribunal under s 152A, or
· if no such agreement or determination is in force, an amount equal to 6.25% of the retail selling price of the record.
17 Under s 152A of the Copyright Act, an application may be made to the Tribunal for an order determining the amount of royalty payable by the manufacturer of a record of a musical work to the owner of the copyright in the work. Such an application may be made by the manufacturer or the owner of the copyright in the musical work. Section 152A(5) provides that the Tribunal must make an order determining an equitable amount of royalty payable by the manufacturer of the record of the musical work to the owner of the copyright in the work.
18 Section 152B(2) of the Copyright Act provides that an application may be made to the Tribunal for an order determining the manner in which amounts of royalty payable by the manufacturer of a record of a musical work to the owner of the copyright in the work are to be paid. Under s 152B(6) the Tribunal must make an order determining the manner in which amounts of royalty payable by the manufacturer of the record of a musical work to the owner of the copyright in the work are to be paid.
19 Under s 136(1) of the Copyright Act, a licence scheme is a scheme formulated by a licensor setting out the classes of cases in which the licensor is willing to grant licences and the charges, if any, subject to payment of which, and the conditions subject to which, licences would be granted in those classes of cases. A licence is a licence granted by or on behalf of the owner of the copyright in a work. A licensor is a body corporate whose constitution:
· entitles any owner of copyright to become a member of the body;
· requires the body to protect the interests of its members connected with copyright;
· provides that the main business of the body is granting licences;
· requires the body to distribute to its members the proceeds, after deduction of administrative expenses, from payments to the body for licences;
· prevents the body from paying dividends.
Each of APRA and AMCOS is a licensor within the meaning of s 136.
20 Under s 154 of the Copyright Act, where a licensor proposes to bring a licence scheme into operation, the licensor may refer the scheme to the Tribunal. The Tribunal must consider the scheme so referred and must make such order, confirming or varying the scheme or substituting for the scheme another scheme proposed by one of the parties to the reference, as the Tribunal considers reasonable in the circumstances. Section 154(6) permits a licensor who has referred a licence scheme to the Tribunal, to bring the scheme into operation before the Tribunal makes an order in pursuance of the reference.
21 A person who claims, in a case to which a licence scheme applies, that he or she requires a licence but that the grant of a licence in accordance with the scheme would be subject to the payment of charges or to conditions that are not reasonable in the circumstances, may apply to the Tribunal under s 157. Further, a person who claims that he or she requires a licence in a case to which a licence scheme does not apply and that a licensor has refused or failed to grant a licence in circumstances where it is unreasonable that the licence should not be granted, may also apply to the Tribunal under s 157. If the Tribunal is satisfied that a claim is well founded, the Tribunal must make an order specifying the charges and the conditions that the Tribunal considers reasonable in the circumstances in relation to the applicant.
22 Section 157A(1) of the Copyright Act provides that, in making a decision on a reference, the Tribunal must, if requested by a party to the reference, have regard to relevant guidelines, if any, made by the Commission. While draft guidelines have been promulgated by the Commission, they remain only drafts. Section 157B provides that the Tribunal may make the Commission party to a reference if the Commission asks to be made a party and the Tribunal is satisfied that it is appropriate that the Commission be a party to the reference. Such an order was made in the present case.
DIGITAL DOWNLOADS
23 The Australian recorded music industry has experienced a significant decline in the sale of physical products over the past ten years and there has been a reduction in the number of units sold and the revenue per unit across the industry. While the advent of digital music presents significant opportunities for record companies, such as Sony and Universal, one of the greater challenges faced by those operating in the digital music sphere is that of managing the problems caused by online music piracy in the form of unlicensed digital downloads.
24 At present, there are more than thirty entities that have licences from APRA and AMCOS authorising online downloading of music. The vast majority of the licensees have a very small proportion of sales of digital downloads based on sales revenue and several of them made no sales in the periods for which details are available. Apple has by far the greatest share of sales. The digital service providers that are parties to the reference together have in excess of 90% of sales. The majority of the licensees, including all the parties, pay a licence fee of 8% of retail sales while a number of other licensees pay 12%.
25 On one view, a digital download is simply another way of delivering to consumers what they have been able to enjoy for many years, namely, digital quality audio files. The compact disc, or CD, originally achieved that breakthrough. Format shifting amendments to the Copyright Act have the consequence that consumers can copy into their own digital music players music recorded on a CD or downloaded from a digital service provider. From the consumer’s point of view, the origin of the digital file is irrelevant as to enjoyment of the music.
26 APRA and AMCOS acknowledge that iTunes Australia is an excellent resource in providing extraordinary flexibility and choice in the purchase of music. iTunes Australia is an online shop which allows consumers to browse through a catalogue of over seven million songs. Consumers can search for music by reference to multiple categories, including artist, song title and genre. There are two components to iTunes, namely, the on line store and the software application installed on the user’s computer. The software application is primarily a digital media player which can play music obtained online from a digital service provider or from other CDs in the user’s collection. Such music can be played directly from the computer’s speakers or can be transferred to a portable digital music player. Once on the computer or portable digital music player, the music can be played through connected speakers or a home, portable or car stereo system. The software application allows the user to collate and organise a music collection in many different ways.
27 While the equivalent of iTunes Australia exists in many other countries around the World, restrictions in the distribution agreements entered into with content providers have the effect that content can only be offered on a country specific basis. iTunes Australia is aimed directly at Australian customers. Staff of iTunes Australia spend time and effort on promoting artists, songs and albums that they believe will be appreciated by customers.
28 iTunes Australia permits customers to buy individual songs or songs as part of albums rather than as single individual songs. A customer who has previously purchased one or more songs from a particular album may return and purchase the full album less the songs or tracks already purchased. A discount corresponding to the value of the songs or tracks already purchased is allowed.
29 Prior to the establishment of iTunes Australia and its equivalents in other parts of the World, the overwhelming majority of music that was obtained online was illegally copied music obtained by users free through illegal online applications. Because of the widespread availability of illegal digital downloads, when iTunes Australia and its overseas equivalents were established, it was thought necessary to make the facilities sufficiently attractive for people to pay for legitimate music. Even so, online piracy is a formidable and competitive rival of iTunes Australia and other digital service providers.
THE TRIBUNAL’S FUNCTION
30 The Tribunal was established to deal with cases where a monopoly or quasi monopoly exists by reason of the role of a collecting society or equivalent licensing body. Copyright law aims to give, to the creator of copyright subject matter, the incentive to invest intellectual effort and resource outlays by conferring the right to prevent copying of works that could otherwise be copied at relatively low cost. A prime purpose of copyright law is to protect the result of creative effort, so that, for example, composers and lyricists may, during the continuance of copyright protection, control the uses to which the results of their creative efforts are put and get some return for the exploitation of those results.
31 One of the mechanisms of the Copyright Act that operates as part of the balancing exercise designed to ensure dissemination and diffusion of ideas is the system of compulsory licence schemes, which ensure appropriate access to copyright subject matter. The exclusive rights granted by the Copyright Act are tempered or qualified by statutory exceptions to the statutory monopoly. Under the scheme of statutory exceptions, in the absence of agreement or consensus, it will be necessary for a determination to be made of the remuneration to be paid by those who will take advantage of the exceptions. It will also often be necessary for a determination to be made of the precise terms and conditions on which the exceptions are to apply.
32 In negotiating the terms upon which protected subject matter may be copied, and the remuneration for such copying, it would generally be easier for users and prospective infringers to deal with a single body rather than with a myriad of individual copyright owners. That is particularly so in the case of the statutory exceptions. The Copyright Act therefore makes provision for the minimisation of the costs of enforcing copyright through the system of collecting societies. Collecting societies provide creators with an administrative option for the more effective enforcement of rights in relation to the use of copyright subject matter and the collection and distribution of licence fees or royalties.
33 Thus, APRA represents composers of music, music lyric writers and music publishers. AMCOS represents the right to reproduce musical works by such mechanical means as tapes, discs, video recordings and cinematographic films. The Phonographic Performance Company of Australia Limited (PPCA) represents the producers and manufacturers of sound recordings. Sony and Universal are members of PPCA.
34 Given the genesis of the Tribunal and the roles and functions of the Commission, as described above, it is tolerably clear that the Tribunal should have regard to competition and the promotion of consumer welfare in references such as that presently before the Tribunal. That consideration, however, is not an overriding one.
35 In determining whether the royalty under a proposed licence scheme is reasonable, the Tribunal may adopt a number of approaches, either alone or, more usually, in combination. The approaches may overlap to some extent. The approaches include the following:
· Market rate: the rate actually being charged for the same licence in the same market in similar circumstances.
· Notional bargain rate: the rate on which the Tribunal considers the parties would agree in a hypothetical bargain, between a willing but not anxious licensor and a willing but not anxious licensee.
· Comparable bargains: the rate arrived at in a bargain not in the same market but in circumstance sufficiently similar to such a hypothetical bargain as might provide some guidance to the Tribunal.
· Judicial estimation: the rate determined by the Tribunal after taking into account a range of matters such as previous agreements or negotiations between the parties, comparison with other jurisdictions, comparison with rates set by other licensors, capacity to pay, value of the copyright material, the general public interest and interest of consumers and administrative costs of the licensor.
THE PROPOSED SCHEME
36 On 14 June 2007, APRA and AMCOS referred to the Tribunal a licence scheme that they proposed to bring into operation. On 29 June 2007, APRA and AMCOS gave notice to the Tribunal that they had brought the licence scheme into operation pursuant to s 154(6) of the Copyright Act, subject to variations specified in the notice. A draft amended reference was filed on 18 June 2008. On 1 July 2008, APRA and AMCOS gave notice to the Tribunal that a proposed licence scheme had been brought into operation with effect from that day.
37 The licence scheme for which confirmation is now sought by APRA and AMCOS has been varied from the scheme that was thus brought into operation. Confirmation of the proposed licence scheme, as varied, is now supported by each of Apple, Telstra, Sony and Universal. Variations made to the licence scheme that was the subject of the original reference were made after consultation and negotiation with those parties. The Tribunal has not been involved in that aspect of the proposed licence scheme. The terms and conditions of the proposed licence scheme, apart from the rate of royalties, are now uncontentious.
38 The essence of the dispute that was before the Tribunal concerned the rate of royalties. Three significant issues may arise in relation to the reasonableness of the royalties payable under the proposed licence scheme as follows:
· the effect that an increase in royalty might have on resort to illegal downloads;
· the relative costs of physical distribution of digital music files in the form of CDs, as compared with on line downloads, and
· whether the differences between the physical distribution and online downloads justifies a departure from the mechanical royalty rate payable under s 55 of the Copyright Act.
The case was resolved before the Tribunal was taken in any detail to the material dealing with the first two issues.
39 As to the third issue, the record companies and AMCOS have agreed a rate, for the purposes of s 55, of 8.7% of a notional wholesale price, being the published price to dealers. That royalty has been agreed in lieu of the default royalty of 6.25% of the retail selling price of a record contemplated by s 55(6). Distribution and discounting practices in relation to physical CDs are complicated and the conversion of that rate into an equivalent of a royalty based on retail price is not without some difficulty.
40 Under the scheme that was brought into operation on 1 July 2008, APRA/AMCOS agreed to accept 8% for downloads of both music and music videos and 8 cents per track for downloads of both music and music videos. In its original form, the proposed licence scheme provided for a royalty consisting of the greater of:
· 12% of the retail price (exclusive of goods and services tax);
· the Track Rate.
Retail Price was defined as the selling price of a Download advertised to the general public. Download was defined as a copy of a Track in the form of an electronic file in which sounds are embodied, including a music video. Track Rate was defined, broadly, as 12 cents for a single track download.
41 The accord reached between APRA and AMCOS, on the one hand, and Apple, Telstra, Sony and Universal, on the other hand, involves a rate for music downloads of 9% of retail price and for music videos of 8% of retail price. The Track Rate will, in general terms, be 9 cents per track for music downloads and 8 cents per track for music videos. The effect of the Track Rate provisions in relation to bundles or albums will be as follows:
· Where the album consists of ten or fewer tracks: 6.5 cents for each track in the album.
· Where the album consists of eleven to twenty-five tracks: 65 cents for the album.
· Where the album consists of more than twenty-five tracks: 2.5 cents per track.
For a single track download or a dual download the Track Rate will be 9 cents for a download other than a music video and 8 cents for a music video.
42 The rates proposed are broadly within the ranges that exist in other jurisdictions. The equivalent rates in other countries are as follows:
· United Kingdom – 8%.
· Canada – 11%.
· United States – 9.1 cents.
The rate in the United States is a fixed monetary rate. The vast majority of single track downloads in the United States at present are supplied at a price of 99 cents per download. Thus the monetary rate is equivalent to 9.1% of the sale price.
THE COMMISSION’S CONTENTIONS
43 The Commission contended that, if the elasticity for demand for digital downloads were not known, the Tribunal would not be able to determine the consequence of a change in royalty rates on sales, revenue and profits. In those circumstances, the Commission contended, the Tribunal could not determine whether a proposed royalty rate was in the best interests of the public or even the best interests of the parties.
44 Elasticity of demand is a measure of the sensitivity of quantity demanded to a change in price. Elasticity depends upon the availability of close substitutes for a product. If demand is elastic and close substitutes are available, a small increase in price will lead to a large decrease in quantity demanded, so that the price rise will lower revenue. However, if there are few close substitutes, and demand is inelastic, a small increase in price will not lead to a large reduction in demand and hence will increase revenue. The elasticity would determine the impact of a change in royalty rates on sales, revenue and profits. The elasticity of demand for online digital downloads would depend upon the availability of close substitutes for such downloads. A particular question that arises in the present context is whether unlicensed downloads and physical CDs are close substitutes for lawful online digital downloads.
45 If the demand for digital downloads is highly elastic, so that a small increase in the retail price of digital downloads would lead to a large decrease in the sale of digital downloads and a decrease in the revenue of the digital service providers, a focus of the Tribunal’s enquiry might be on the likely effect of raising royalty rates on the prices charged by digital service providers and on the sales of licensed music. That would include an analysis of the likely impact of increased royalties on the price paid to record companies by digital service providers.
46 On the other hand, if demand for digital downloads is inelastic, so that a small increase in the retail price of digital downloads did not decrease the revenue of digital service providers, a rational digital service provider paying a higher royalty rate to song writers would increase the retail price of digital downloads. In that case, the focus of the Tribunal’s enquiry might be on the reasonableness or efficiency of a higher retail price for digital downloads. The relative profits of the digital service provider and record companies would be irrelevant.
47 The Commission identified three possibilities or combinations of possibilities as follows:
· the digital service providers pass through all or part of a royalty increase, so that the retail price increases and the quantity of downloads purchased decreases;
· the digital service providers do not pass on all the royalty rate increase but instead earn a smaller margin;
· the digital service providers do not pass on the royalty rate increase but instead negotiate a lower royalty rate with the record companies.
The Commission contended that the most likely outcome was a combination of the first two possibilities.
48 The Commission lamented the absence of appropriate evidence as to the elasticity of demand for online digital downloads and asserted that none of the experts retained by APRA and AMCOS, on the one hand, and the digital service providers, on the other, reliably estimated the elasticity of demand and that no one had developed a reliable estimate of the impact of an increase in the royalty rate on sales of licensed music or downloading of unlicensed music. The Commission contended that, because of the absence of such reliable evidence concerning elasticity of demand, the Tribunal would not be in a position to predict reliably the consequence to the public or the parties of an increase or decrease in the royalty rate. Thus, the Commission said, the Tribunal would not be able to determine whether the rates of royalty proposed under the proposed licence scheme were economically efficient and thus reasonable.
49 However, the Commission considers that the accord reached between APRA and AMCOS, on the one hand, and the digital service providers who are parties to the reference, on the other, is evidence upon which the Tribunal could find that the proposed licence scheme is reasonable. That is to say, Apple, Telstra, Sony and Universal are all substantial companies. In particular, Apple has a very high share of the sales of digital downloads and, the Commission says, therefore has substantial bargaining power. Together, the digital service providers who are parties to the reference enjoy well in excess of 90% of the revenue from online digital sales.
50 While the Commission contends that Apple has substantial bargaining power, that is a matter of controversy that has not been explored by the Tribunal. APRA and AMCOS, on the one hand, and the Digital Service Providers who are parties, on the other, are well resourced and capable of pursuing the proceeding in the Tribunal to a conclusion. The Tribunal makes no finding as to whether any party has substantial bargaining power to the extent that that expression might suggest that any party is in a materially different position from any other party.
51 The Commission also draws attention to the position of other prospective licensees. Any person may approach the Tribunal under s 157 of the Copyright Act. However, not every prospective applicant will have the financial resources to bring such an application before the Tribunal. In considering whether to confirm a scheme, the Tribunal ought to have regard, not only to the interests of the parties to a reference but also to other persons who may wish to obtain a licence. At least 20 persons who are not parties to the reference have existing licences with APRA and AMCOS.
52 In all of those circumstances, the Commission contends that it would be in the interest of persons who are not parties to the reference that the licence scheme now proposed be confirmed. The effect of confirmation would be that other parties, who are smaller players in the market, would be able to obtain the same royalty rates that Apple and the other digital service providers who are parties to the reference have negotiated with APRA and AMCOS. In the absence of confirmation of the proposed licence scheme, such smaller parties would be required to negotiate separately with APRA and AMCOS. It may not be possible for smaller parties to negotiate rates as favourable as those negotiated by Apple and Telstra. Having regard to those considerations, the Commission does not oppose the confirmation of the proposed licence schemes.
CONCLUSION
53 The Tribunal has considered the proposed licence scheme as now propounded on behalf of APRA and AMCOS and considers that the proposed licence scheme is reasonable in the circumstances described above. Accordingly, the Tribunal has concluded that the proposed licence scheme should be confirmed under s 154(4) of the Copyright Act.
| I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Tribunal. |
Associate:
Dated:
| Counsel for APRA/AMCOS: | D. Catterns QC with M.R. Hall |
| Solicitor for APRA/AMCOS: | Banki Haddock Fiora |
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| Counsel for Apple: | A.J.L. Bannon SC with N.R. Murray |
| Solicitor for Apple: | Clayton Utz |
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| Counsel for Telstra: | S.G. Finch SC with J.M. Hennessy |
| Solicitor for Telstra: | Mallesons Stephen Jaques |
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| Counsel for the Record Companies: | R. Cobden SC with C. Dimitriadis |
| Solicitor for the Record Companies: | Gilbert + Tobin |
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| Counsel for the Commission: | R.J. Webb SC with S.W. Balafoutis |
| Solicitor for the Commission: | Baker & McKenzie |
| Date of Hearing: | 30 November, 1, 2, 3, 4, 7, 8, 9 and 16 December 2009 |
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| Date of Judgment: | 17 December 2009 |