COPYRIGHT TRIBUNAL OF AUSTRALIA

Universal Music Australia v EMI Music Publishing Australia Pty Ltd (No 2)

[2000] ACopyT 7

COPYRIGHT TRIBUNAL – jurisdiction – first release records – whether interim order can be made in respect of first release records

Copyright Act 1968 (Cth) s 55

UNIVERSAL MUSIC AUSTRALIA and Others v EMI MUSIC PUBLISHING AUSTRALIA PTY LIMITED and Others

CT 2 of 1999

TRIBUNAL:              FINKELSTEIN DP, PROFESSOR PEARCE, MS BOWNE

DATE:                        5 SEPTEMBER 2000

PLACE:                      SYDNEY

REASONS FOR DECISION

THE TRIBUNAL

1                     On the application of a number of Australian record manufacturers, who are represented by Australian Record Industry Association Limited (ARIA), the Tribunal made an interim determination about the payment of royalties for the statutory licence to manufacture records and the manner for the payment of those royalties (see [2000] ACopyT 5).  The Tribunal ordered that royalties should be paid in accordance with the mechanical copyright agreement dated 24 April 1994 between those manufacturers and the respondents, being the owners of the copyright in the records, as amended by two heads of agreement, save that a proportion of the formerly agreed royalty is to be paid into an interest-bearing account pending the final resolution of the proceeding.

2                     Australasian Mechanical Copyright Owners’ Society Limited (AMCOS), which represents the copyright owners, queries the precise scope of the operation of the interim order.  The issue arrises in the following way.  The compulsory licensing system established by the Copyright Act 1968 (Cth) for the reproduction of a musical work excludes from its operation what the recording industry refers to as “first release records”.  A first release record is a record of a new musical work which is made in or imported into Australia within one month from the date on which the previous record of that work was first made in or imported into Australia or one month from the date on which the previous record was first supplied to the public in a convention country, whichever is earlier:  see s 55 of the Copyright Act and reg 15 of the Copyright Regulations 1969 (Cth).  Without a contractual licence to reproduce a first release record, a manufacturer who reproduces the record will infringe the copyright in the musical work on the record.  The agreement the subject of the interim order deals with first release records.  Clause 4.3 provides that the agreement does not constitute a grant of a licence to make first release records.  Clause 11.4 then provides a mechanism for the grant of a licence in respect of first release records.  First a manufacturer wishing to sell a first release record must give notice of its intention to do so to AMCOS:  cl 11.1.  Thereafter the owner of the copyright in any musical work on the record can advise the manufacturer whether a licence is or is not granted for the proposed reproduction:  cl 11.4.  If a licence is granted then the rate of royalty set by the agreement for compulsory licensed records operates in relation to that first release record:  cl 4.3.  It appears to be accepted that it is not open to the licensor to grant a licence at any other rate.

3                     In these circumstances, if the interim order operates in relation to first release records then a percentage of the contractual royalty payable on those records will be paid into the interest-bearing account to be dealt with as the Tribunal determines at the conclusion of the proceeding.  On the other hand, if the parties are required to reach an independent accommodation on the royalty that is to be paid for the reproduction of first release records, it is unlikely that the agreement will require any payment into the interest-bearing account. 

4                     AMCOS makes the point, which is not in dispute, that the Tribunal has no jurisdiction to determine the royalty for first release records because those records are outside the statutory licensing scheme.  From this it follows, so the argument goes, that the Tribunal has no jurisdiction under s 160 to make an interim order in respect of first release records.  Accordingly AMCOS says that the interim order that has been announced by the Tribunal should make it clear that first release records are excluded from its operation. 

5                     For its part, ARIA submits that the Tribunal does have jurisdiction to make an order that applies to first release records and it says that there are good reasons why such an order should be made.  The reasons include, but are not limited to, the following.  In practice there are no separate royalty negotiations for first release records.  The rate that applies for records under the statutory licence is always adopted.  First release records amount to only a small proportion of records that are manufactured.  It would be both inefficient and expensive to establish separate royalty systems for first release records and for those covered by the statutory royalty.  It also says that the copyright owners should have raised this issue much earlier in the day, at least during the hearing and their failure to do so has prejudiced ARIA in its presentation of the case on behalf of the manufacturers.

6                     There can be no doubt that as a matter of convenience and practicality it would not be sensible to separate first release records from records under the statutory licence for the purpose of assessing royalty.  To do so would impose obligations on the manufacturers which would not result in corresponding benefits to the copyright owners.  For this reason alone, if it were proper to do so, the interim order, or some modified version of the order, could be made to cover first release records.

7                     But the matter is not that straightforward.  Two problems arise.  The first is whether the Tribunal has jurisdiction to make such an order.  The second problem is the utility of any such order.  It is to the issue of jurisdiction that we turn first.

8                     We had occasion to consider aspects of the jurisdiction of the Tribunal in our ruling on the application for interim relief.  The issue that required determination was whether the Tribunal could impose an interim arrangement, one aspect of which was that the manufacturers were not required to pay a royalty on records distributed free of charge for promotional purposes.  The Copyright Act provides that any royalty fixed by the Tribunal must not be less than one cent for each record.  Thus the question arose whether this limitation restricted the power of the Tribunal to grant interim relief.  The Tribunal was of opinion that there was good reason for the interim arrangement between the manufacturers and the copyright owners to provide that no royalty be paid on free records.  The Tribunal found that the power conferred upon it by s 160 was not confined by the nature of the final relief that could be granted and held that the Tribunal could make an interim order that put in place a practical arrangement even if such an arrangement contained a particular component that could not be ordered as final relief.

9                     It was not then necessary to define exhaustively the limits of the power conferred by  s 160.  Nor it is necessary to do so now.  What seems to us to be clear, however, is that s 160 does not enable the Tribunal to impose any obligations upon the parties as regards first release records.

10                  The principal function of the Tribunal is to determine the remuneration or royalty that is payable to a copyright owner by a person who has taken advantage of statutory licensing.  The Tribunal can determine the manner in which the remuneration or royalty is to be paid and in some cases it may establish a system for the calculation of the number of licensed copies of a work that have been made.

11                  The power to grant interim relief is given in general terms.  That is not surprising given the variety of powers that the Tribunal can exercise.  However, in a case such as the present, the principal object of granting interim relief is to establish a royalty regime until final arrangements can be put in place.  No doubt the Tribunal could also make orders that are ancillary to an interim royalty regime.  But whatever other order be made, it must bear some relation to the final relief that is available. 

12                  Imposing an obligation in relation to first release records is not sufficiently connected with the Tribunal’s power to grant final relief so as to be within jurisdiction.  Accordingly, the interim order will not cover first release records. 

13                  There is, in any event, no utility in making an order in respect of first release records that requires a sum of money to be placed into the interest-bearing account.  The purpose of establishing that account is to create a fund that will stand as security for the copyright owners in the event that it is finally determined that the royalty payable for statutory licensed records is greater than the rate fixed by the agreement less 7½ per cent.  It is not necessary for the Tribunal to impose a regime for the payment of royalty on first release records so as to increase the amount of that security.  If the Tribunal was of the opinion that additional security was required, a deduction greater than 7½ per cent would have been ordered. 

14                  It is unfortunate that this issue was not raised at the hearing for interim relief.  However, because AMCOS queried the jurisdiction of the Tribunal to make the interim order that was announced, it became necessary to deal with this issue.

15                  Just as parties cannot consent to a body exceeding its jurisdiction, so a party cannot be prevented from challenging jurisdiction merely by its delay.  We doubt that the delay has caused any substantial prejudice that cannot, to a significant extent, be remedied by an appropriate order as to costs.

16                  While no order can be made by the Tribunal in respect of first release records, this does not prevent the parties from agreeing to act as if those records were covered by the Tribunal’s order in relation to other records.  This may be the most appropriate and efficient way to manage the granting of licences for copying first release records and maintaining records of copying generally. These factors have appeared to influence the inclusion of clauses 4.3, 11.1 and 11.4 in the expired agreement.  Common sense would suggest that the parties adopt a similar course.

17                  The parties should bring in short minutes of order within 5 days to reflect these reasons and the earlier reasons.

Associate to the Deputy President:

Dated:  5 September 2000