COPYRIGHT TRIBUNAL OF AUSTRALIA

Application by Isentia Pty Limited [2018] ACopyT 4

File number:

CT 2 of 2018

The Tribunal:

GREENWOOD J (PRESIDENT)

Date of decision:

16 November 2018

Legislation:

Copyright Act 1968 (Cth), ss 157(3), 160

Cases cited:

Australasian Performing Right Association Limited v Federation of Australian Commercial Television Stations [1995] ACopyT 2

Application by Streem Pty Limited [2018] ACopyT 1

Copyright Agency Limited v University of Adelaide [2000] ACopyT 2

Universal Music Australia v EMI Music Publishing Australia Pty Ltd [2000] ACopyT 5; 155 FLR 362; 48 IPR 99

Date of hearing:

10 August 2018

Date of last submissions:

10 August 2018

Category:

No Catchwords

Number of paragraphs:

116

Counsel for the Applicant:

Mr P Brereton SC with Ms L Thomas

Solicitor for the Applicant:

Clayton Utz

Counsel for the Respondent:

Mr C Dimitriadis SC with Ms E E Whitby

Solicitor for the Respondent:

MinterEllison

COMMONWEALTH OF AUSTRALIA

Copyright Act 1968

IN THE COPYRIGHT TRIBUNAL

CT 2 of 2018

application by:

ISENTIA PTY LIMITED (ACN 002 533 851)

BETWEEN:

ISENTIA PTY LIMITED (ACN 002 533 851)

Applicant

AND:

COPYRIGHT AGENCY LIMITED (ACN 001 228 799)

Respondent

TRIBUNAL:

GREENWOOD J (PRESIDENT)

date of order:

16 NOVEMBER 2018

THE TRIBUNAL DIRECTS THAT:

1.    The parties submit within 10 days proposed orders giving effect to these reasons by submitting the proposed orders to the Registrar of the Tribunal, Registrar Belcher.

2.    These interim orders made pursuant to s 160 of the Copyright Act 1968 (Cth) and the reasons for the determination are published from the Chambers of the President of the Copyright Tribunal of Australia, the Hon Justice Andrew Greenwood.

3.    The Confidential Schedule to the Reasons for Determination are published to the solicitor having the carriage of the application for the applicant, Mr Timothy Webb of Clayton Utz and the solicitor for the respondent, Mr John Fairbairn of MinterEllison, having regard to the confidentiality arrangements to which both solicitors are parties.

4.    The Confidential Schedule may be supplied by either Mr Webb or Mr Fairbairn to any individual who has entered into the relevant arrangements for the preservation of the confidentiality of the information contained in the Confidential Schedule.

REASONS FOR DETERMINATION

GREENWOOD J (PRESIDENT):

1    These proceedings are concerned with an application by Isentia Pty Limited (“Isentia”) for the making of interim orders under s 160 of the Copyright Act 1968 (Cth) (the “Act”) so as to provide for the grant of a licence to Isentia by or from Copyright Agency Limited (“CAL”) on the terms and conditions of a Press Monitoring and Online Monitoring Licence (the “2016 Isentia Licence”) executed between the parties on 8 April 2016 (and which operated between them in the period 1 July 2016 to 30 June 2018), modified however to reflect a different licence fee arrangement or protocol.

2    The proposed orders are interim in the sense that they are intended to operate until the final determination by the Tribunal of Isentia’s application under s 157(3) of the Act, any other agreement reached between the parties or the termination of CAL’s agency agreement with CopyCo Pty Ltd (“CopyCo”). The significance of CopyCo, although well-known, is explained later in these reasons.

3    Considerable affidavit material has been filed in support of the application for interim orders and CAL has filed, in support of its opposition to the particular orders sought by Isentia, an extensive affidavit of Mr John Ian Fairbairn, the solicitor for CAL. All of the affidavits refer to confidential material reflecting the sensitivity of commercial terms or exchanges between the parties and some other commercial participants in relevant markets. In these reasons, I propose to be as circumspect as possible in addressing those matters. Where it becomes necessary to refer to particular confidential matters, those matters will be referred to in a confidential schedule published only to the parties to this proceeding.

4    This application is the third application this year for orders under s 160 so as to establish interim terms and conditions of a licence by CAL in favour of the relevant applicant pending the determination of that applicant’s particular s 157(3) application.

5    On 23 May 2018, the Tribunal made orders (in CT 2 of 2017) under s 160 (with effect from 1 December 2017) in an application by Meltwater Australia Pty Ltd (“Meltwater”) extending, in effect, during the interim period (as understood in the same sense as above), an earlier licence between CAL and Meltwater described as a Scraping Licence dated 1 December 2014 as varied on 7 October 2016 and a Press Clipping Service Licence Newspaper and Magazines: Copying & Communication Rights dated 12 October 2015, including an obligation to pay the licence fees as framed in those licences, during the interim period. The orders also provide for an adjustment, up or down, as between CAL and Meltwater from 1 December 2017 should the Tribunal finally decide that the terms of those licences are to be varied, including as to the licence fees by either increasing or reducing the fees.

6    The licence fees payable under the interim Meltwater arrangements (orders) have loomed large in Isentia’s application for interim orders as explained later in these reasons.

7    However, for present purposes, it is enough to observe that Isentia contends that the rights in the copyright subject matter and scope of entitlements granted to Meltwater by CAL under the licences earlier described, and extended on an interim basis as ordered, are not materially different to those granted to Isentia under the 2016 Isentia Licence, and should that licence be extended on an interim basis without the adjustments to the licence fee regime sought by Isentia so as to bring about interim parity in the fees paid to CAL as between Meltwater and Isentia, the orders will necessarily work, on an interim basis, significant prejudice to Isentia. That is said to follow because extending on an interim basis the 2016 Isentia Licence without the proposed adjustments to the licence fee regime will incubate distortions in the competition and rivalry between Isentia and Meltwater in their respective downstream businesses where each company necessarily deploys the licensed rights in their various service offerings to clients or potential clients. That is said to follow because, on the one hand, Meltwater will be paying a certain level of fees for the rights and, on the other hand, Isentia will be paying a higher level (a substantially higher level it is said) of fees for those rights, should interim orders be made which fail to take account of differential treatment in the licence fee regime. This issue is explained more fully later in these reasons. However, the issue is not just a theoretical one. Isentia says that due to the differential licence fee regime, it has already lost seven Platinum clients to Meltwater, 36 Gold clients to Meltwater, 53 Silver clients to Meltwater and 75 Bronze clients to Meltwater. These matters are addressed later in these reasons.

8    There seems to be no doubt that Meltwater and Isentia are head-to-head rivals and, in each case, the CAL licence rights are critical to the conduct of the downstream offerings to clients of each company. Isentia says that both companies offer “full service media intelligence platforms”. The nature of the relevant businesses and, in particular, Isentia’s business is explained later in these reasons.

9    Isentia says that making the proposed adjustments, by orders under s 160, to the licence fee provisions of the 2016 Isentia Licence on an interim basis is necessary to address prejudice and that is a proper matter to weigh in the balance in making orders under s 160. CAL says that Isentia is, in truth, seeking to engage the Tribunal, in this application for interim orders, in a present assessment of whether the licence fee provisions of the 2016 Isentia Licence are reasonable or not, and undertaking that exercise is something to be left to the hearing and ultimately the final determination of the questions in issue by the Tribunal.

10    The Tribunal also made orders under s 160 extending on an interim basis a Licence Agreement between CAL and Streem Pty Limited (“Streem”) which operated from 1 March 2017 to 30 June 2018 subject to an adjustment mechanism in light of the Tribunal’s final determination: Application by Streem Pty Limited [2018] ACopyT 1 (the “Streem application”). At [21] of the reasons, the Tribunal observed, as to the negotiations between CAL and Streem that:

… an agreement struck as recently as July 2017 and then extended by agreement between the parties on 21 November 2017 to 28 February 2018 and then extended again as recently as 2 February 2018 until 30 June 2018 is the best evidence of a bargain struck between the parties which seeks to allocate risk according to the terms and conditions of the document including the licence fee arrangements. The Tribunal ought to be reluctant to make an interim order that re-casts the balance struck so recently between the parties in distributing rights, risks and revenue.

11    In addition, the Tribunal observed that the parties were represented by very experienced professional advisers and directors: Streem application at [29].

12    As to the principles governing the scope of the power conferred upon the Tribunal by s 160, the Tribunal said this at [4] of the Streem application:

4.    The parties agree that the relevant principles governing the exercise of the power conferred upon the Tribunal by s 160 of the Act are these:

1.    The Scope of the power to make interim orders under s 160 of the Act has been considered by the Tribunal in a number of decisions and has been construed widely: see Universal Music Australia v EMI Music Publishing Australia Pty Ltd [2000] ACopyT 5; 155 FLR 362; 48 IPR 99 (Universal v EMI) at [19]-[22]; Australasian Performing Right Association Limited v Federation of Australian Commercial Television Stations [1995] ACopyT 2 at pages 10-12.

2.    The Tribunal’s power to make interim orders under s 160 is not confined by the nature of final relief that may be granted under s 157: Universal v EMI at [19]-[22].

3.    It is important to bear in mind that the present hearing concerns an application for interim, not final, relief. It is inappropriate for the Tribunal to determine the reasonableness of the method of calculating licence fees ahead of the final hearing: Universal v EMI at [15] and [24].

13    Isentia accepts the correctness of this statement of the principles.

14    The Tribunal simply adds to this understanding of the principles, the observation that the power conferred by s 160 is, of course, a conferral of a statutory power on the Tribunal. The Tribunal does not exercise the judicial power of the Commonwealth because the Tribunal, obviously enough, is not a Chapter III Court. The character of the power and the ends served by its exercise take their colour from the Act. The power is wide. It may be informed by some or all of the considerations that are weighed in the balance when a Court considers granting (or not) an interlocutory injunction. In Copyright Agency Limited v University of Adelaide [2000] ACopyT 2, the Tribunal, constituted by Finkelstein DP, observed at [10] that in exercising the power under s 160 the “[t]ask of the Tribunal is to decide whether it is reasonable and appropriate to grant interim relief” [emphasis added].

15    When Isentia asserts in its oral and written submissions that adjusting the licence fee so as to eliminate distortions in the price of the rights and thus eliminate distortions in rivalry with Meltwater (due to differential interim fee regimes arising by reason of interim orders), is “reasonable”, I take Isentia to mean that making the adjustments is a reasonable and appropriate exercise of the power in the sense that term is used by Finkelstein DP, rather than a qualitative analysis, on the s 160 application, of the merits or reasonableness itself of the licence fee provision in the 2016 Isentia Licence.

16    It is now necessary to address aspects of the evidence relied upon by Isentia in support of its application for the particular interim orders and the evidence relied upon by CAL in resisting the orders sought by Isentia.

17    Mr Sean Anthony Smith is Isentia’s Chief Commercial Officer. Mr Smith swore an affidavit of 17 July 2018 in support of Isentia’s application for an interim order.

18    Mr Smith has worked at Isentia since 2001 in various roles. He is experienced in this industry. He has 17 years’ experience in what is called the “media intelligence industry in Australia”. Aspects of that phrase are explained later in these reasons. Isentia commenced business in the 1970s as a provider of a press clippings service known as Media Monitors. However, over the last 20 years, with the development in digital technology and the provision of particular software applications (products/solutions) and “value-added services” such as “media influencer databases, social media and content consultancy”, Isentia’s business has adapted so as to provide a service of “tracking” media transmissions whether “online” or “offline channels” including newspapers, magazines, television, radio, online publications, blogs and social media. Isentia’s “platforms” are used to deliver information, reports and alerts to industry leaders, company directors, senior executives and government.

19    Isentia’s two media monitoring services are called “Slice” and “Mediaportal”. Slice is a low cost service for basic media tracking. Mediaportal is Isentia’s flagship product. It is delivered through an Isentia owned software solution (such products are often called “Software-as-a-Service” or “SaaS”). Mediaportal enables clients of Isentia to operate in a “cloud-based workplace” (that is, by access to a series of servers) to organise and report on “media intelligence” across their organisation. The Mediaportal “platform” aggregates print, TV, radio, online and social media content for clients. Clients can log into the Mediaportal website to review media reports responsive to their search field. However, clients also receive email alerts. Results are exported into an Excel spreadsheet or PDF document or via an “app”. Mediaportal has a substantial number of unique logins each morning and generates a substantial number of alerts each day. The service levels to customers are graded as Bronze, Silver, Gold and Platinum. Those categories reflect the level of fees paid by the category of client. A Platinum client usually spends in excess of #11 per annum.

20    Mr Smith says the media intelligence market has an annual value (turnover) of $110 million. He estimates that Isentia has about a 70% market share by value. The remaining 30% is essentially held by Meltwater although Mr Smith thinks that Streem holds about 2% or 3% of the market. Meltwater is a wholly owned subsidiary of Meltwater Holding BV founded in Norway. The “Meltwater Group” is now headquartered in California in the United States. It has offices in Europe and Asia. It entered the Australian market in 2007. It provides media monitoring services, analysis, tracking, editorial content, tracking blogs and social media. It also focuses upon “larger businesses and brands” including “many of Isentia’s clients”.

21    Mr John Andrew Croll was the Chief Executive Officer and Managing Director of Isentia Group Limited (“Isentia Group”), the parent of Isentia from 1999 (then known as Media Monitors) until May 2018. Media Monitors changed its name to Isentia in 2013 (having earlier adopted the name “Sentia”). In 2014, securities in Isentia Group became listed on the Australian Stock Exchange. Mr Croll affirmed an affidavit of 27 July 2018 in support of Isentia’s application for an interim order.

22    Mr Croll negotiated Isentia’s first licence agreement with CAL before he became CEO in 1999. He says that from then until the commencement of the 2016 Isentia Licence (the “current CAL licence”), Isentia always paid CAL “volume-based” fees for the reproduction and communication of press clippings (that is, a cents-per-article rate). There were, he says, no minimum or additional fees.

23    In 2001, Isentia entered into a document entitled Press Clipping Service Licence: Newspapers and Magazines, Copying & Communication Rights (the “2001 Licence”). It provided for a licence fee of $1.00 per article communicated to a customer. The rate increased according to movements in the CPI. This licence remained in effect until the commencement of the current licence in July 2016. From 1 July 2015, the uplifted per article rate was the amount shown at #44 of the Confidential Schedule.

24    Also in 2001, Isentia and CAL entered into a document called Press Clipping Service Licence Newspapers Fax Transmission Licence (the “2001 Fax Licence”). It provided for Isentia to pay CAL a licence fee for such transmissions calculated as a percentage of the total amount invoiced to clients for the transmission of articles by this method. Fax transmissions no longer occur.

25    In 2014, Isentia and CAL entered into a Scraping Licence. The Scraping Licence enables Isentia to systematically copy or extract (“scrape”) works from electronic editions of the mastheads listed in Annexure A to the Licence and communicate a portion of the scraped work to Isentia’s customers along with a link to the work on the publisher’s website. The scraping licence had a term of 1 July 2014 to 30 June 2015 and provided for a fixed fee of #22. The Scraping Licence was, in effect, extended until 30 June 2016.

26    The 2001 Licence, the 2001 Fax Licence and the current licence all record that CAL is the agent of CopyCo for the purposes of those agreements.

27    Mr Fairbairn in his affidavit explains the structure of CopyCo and the relationship between CopyCo and CAL.

28    CAL is a declared collecting society under the Act in relation to particular statutory licences which are not relevant for present purposes. Apart from that role, CAL has been authorised by its members, on a non-exclusive basis, to sub-licence third parties to reproduce, publish and communicate literary and artistic works under voluntary licences it administers. CopyCo is a company limited by shares formed in 1999 to represent the interests of its publisher members in the licensing of newspaper and magazine articles in which the publisher members or their related entities own the copyright. The shareholders of CopyCo are Fairfax Digital Pty Limited; News Limited; Bauer Media Pty Limited (“Bauer”); Rural Press Pty Limited; and APN Newspapers Pty Ltd (“APN”).

29    Various publishers have granted CopyCo a non-exclusive licence to sub-licence specified rights. Those publishers are APN; Bauer; Elliot Newspaper Group Pty Ltd; Fairfax Media Limited; News Digital Media Pty Ltd; Pacific Magazines Pty Ltd; Rural Press Ltd; The Border Watch Pty Ltd; Torch Publishing Company Pty Ltd; and West Australian Newspapers Ltd. Mr Fairbairn describes each of these entities as a “CopyCo Publisher”. On 20 March 2000, CopyCo entered into an Agency Agreement with CAL under which it appointed CAL to act as its agent to sub-licence the licensed rights, collect fees and distribute the proceeds of those fees. CopyCo is itself a publisher member of CAL.

30    CAL’s right or entitlement to grant sub-licences to media monitoring organisations of the rights licensed to CAL as earlier described in respect of copyright owned or controlled by a CopyCo Publisher is by means of the Agency Agreement of 20 March 2000. From time to time, CopyCo has advised CAL, at the request of a CopyCo Publisher, of changes to the rights licensed to CAL.

31    Apart from the current CAL agreement, Isentia also has direct agreements with key individual publishers including News Limited entities and Fairfax Media Limited entities, for the supply of print publications in PDF form so as to improve the quality of images and the timeliness of providing press clippings for delivery to Isentia’s clients. Isentia also has separate copyright licences with individual publishers of print and online publications which are not CAL members including, for example, the Guardian and the Australian Broadcasting Corporation. Isentia also has copyright licences with substantially all broadcasters in television and radio in Australia.

32    Clients of Isentia may wish to reproduce the press clippings they receive through Isentia’s various services. They may wish to internally distribute material via email or on an intranet. They may wish to store such material. In order to exercise those rights, the clients must have a separate licence with CAL commonly described as a “downstream” licence. Isentia administers downstream licences on behalf of CAL for some of its clients (and those arrangements apply to a substantial number of Isentia’s clients).

33    As to the current licence (which, of course, expired on 30 June 2018 subject to the current arrangements pending this s 160 application), CAL has granted Isentia a non-exclusive licence to do certain things in the Territory in respect of Licensed Works for the relevant Term. The Territory means Australia and the 13 countries set out in Annexure E. The Licensed Work means an Edition and any other work which CAL has been authorised to licence (other than an Excluded Work and any work for which Isentia is licensed under another agreement including agreements directly with publishers). An Edition means a printed edition of a newspaper, magazine or similar periodical publication and an electronic edition of a newspaper, magazine, website or other electronic news service which is publicly available in a manner authorised by the relevant “rightsholder” or otherwise available to Isentia as authorised by the rightsholder (and which has not been obtained by Isentia in a manner prohibited by the rightsholder). An Edition does not include an Excluded Work and that term means a “specified work”, the title or publisher of which is notified in writing to Isentia by CAL. The rights granted to Isentia at clause 1.1 are these: see clause 1.1(a) to (d) recited in the Confidential Schedule.

34    As to the content of this paragraph, see the text of [34] as set out in the Confidential Schedule.

35    By clause 6.1, Isentia agrees to pay CAL the Licence Fee for the rights granted under the licence during each quarterly period of the Term. The term Licence Fee means the amount payable by Isentia set out in Annexure A or amounts determined under cls 6.5 or 6.6 of the licence.

36    “Annexure A” provides for an annual minimum licence fee (ex GST) of #33. That licence fee is made up of three categories of activity: “Press Monitoring”; “Online Monitoring”; and “Downstream use”. Press Monitoring consists of copying and communicating full text print and digital print editions for a “Press Monitoring Service”. For “press clips” the annual minimum fee component of the overall minimum fee at #3 is #44 enabling up to #55 clips. Amortising the minimum press clips fee at #4 over the annual nominated number of clips at #5 results in a rate per clip of #66 assuming Isentia supplies the number of clips at #5. Isentia says it has never supplied the nominated number of clips at #5 and so, it says, the rate per clip at #6 is merely theoretical. However, should Isentia supply greater than the number of clips at #5, the press clips fee would then become a variable fee of the actual number of clips supplied multiplied by the rate at #6.

37    The “Online Monitoring” consists of copying and communicating portions from online editions for the “Online Monitoring Service” and downstream use by customers of content from Online Editions. The minimum annual fee component of the overall minimum fee at #3 is #77 or the percentage at #88 of Online Monitoring Revenue (otherwise called the “Online Variable Fee”), if greater than the amount at #7.

38    “Downstream use” consists of use by Isentia’s customers of content from print Editions. The minimum annual fee to enable Downstream use by corporate customers is #99, or an amount based on applying CAL’s “corporate rate card” set out in Annexure C to the current CAL agreement, to Isentia’s corporate customers (if that formula results in an amount greater than the minimum fee at #9). The Downstream use fee for supply to Isentia’s government customers is #1010.

39    In addition to the overall minimum total annual licence fee, Isentia must pay CAL a further amount in excess of the particular fee at #10. If CAL licences a customer of Isentia directly to undertake Downstream use and the customer elects not to continue its downstream arrangements with Isentia, the minimum corporate or government downstream fee (whichever is relevant) is then reduced “by the amount of that Customer’s use”.

40    Mr Smith says that because Isentia has never reached the nominated press clips number at #5, the actual press clip rate it pays is “much higher” than the rate at #6, and similarly, the minimum fee at #7 amounts to a much higher actual percentage of Online Monitoring Revenue than the percentage at #8, having regard to the proportion the amount at #7 bears to Isentia’s Online Monitoring Revenue.

41    Mr Smith says that he has some understanding of Meltwater’s licensing arrangements in Australia based on discussions he has had with Isentia clients who have been offered Meltwater’s services, or alternatively, from former clients of Isentia he has spoken with who have transferred their media intelligence business to Meltwater. Mr Smith says that the licence fee Meltwater pays to CAL is “more favourable” than the licence fee provisions of the current CAL licence with Isentia. By “more favourable” he means that the per clip rate for supplying press clips is lower than the “actual Isentia” rate having regard to the outworking of the factors mentioned earlier in these reasons, and so too the percentage of Online Monitoring Revenue payable by Meltwater is lower than the actual percentage paid by Isentia having regard to the considerations mentioned earlier in these reasons. Moreover, Mr Smith says that the overall licence fee payable by Meltwater, as a percentage of revenue from those services is less significant than that applying to Isentia. As discussed later in these reasons, the relevant actual per clip rates are those amounts at #26 and #30 of the Confidential Schedule.

42    Mr Smith says that some of Isentia’s clients or former clients (unidentified by Mr Smith, perhaps for obvious reasons) have told him that Meltwater promotes its services by emphasising that its copyright costs are lower than Isentia’s copyright costs. Mr Smith also says that Meltwater’s Online Monitoring Service provides clients with an unlimited search facility on all online content whereas the current CAL Isentia licence is not as broad as that and imposes more onerous obligations on Isentia concerning clips communicated to clients and online clips delivered to a client.

43    Mr Smith says that as a result of all of these differential licensing arrangements as between CAL and Meltwater on the one hand, and CAL and Isentia on the other hand, Isentia has lost to Meltwater (and also in a less significant way to Streem) since 1 July 2016 the list of clients at pp 47 to 52 of Confidential Exhibit SAS-1 which consists of #1111 entities. Isentia recently lost the New South Wales State Government tender for media monitoring services valued in excess of #1212. Mr Smith says that he was personally involved in the negotiations with the New South Wales State Government and, in those negotiations, Isentia’s ability to “reduce the copyright costs was a key deliverable”. He says that Isentia was limited in its capacity to negotiate any concessions on the copyright costs in circumstances where Isentia was subject to a licence fee as described at #3 “irrespective of the volumes delivered”. He says that another example of a key loss of a major client was the loss of Isentia’s long term relationship with UBS. Mr Smith says that the increase in copyright fees made the provision of the services to UBS “unsustainable”. He says that even though Isentia reduced the price increase in the service to UBS, UBS “could not afford” the service. He says that Ms Caroline Gurney of UBS “understood” that the price increases from Isentia “related to copyright but still confirmed that [those costs] were too high”. He says that Ms Gurney said that UBS was happy with other elements of Isentia’s service. However, UBS engaged Meltwater as their new provider.

44    Mr Smith says that the minimum annual fee recited in the current CAL licence with Isentia is a “very significant increase” in the total copyright fees paid to CAL pursuant to the licences that immediately preceded the current CAL licence. Mr Smith says that the licence fee in the current CAL licence represents a #1313 year-on-year increase. Mr Smith says that when Isentia attempted to pass the higher copyright charges on to clients, many clients simply refused to pay increased fees. Another example of a client that refused to accept high fees from Isentia following entry into the current CAL licence is the Queensland Government. Mr Smith exhibits an email about that matter to his affidavit. Mr Smith says that copyright expenses are one of Isentia’s largest cost items, second only to staffing costs. Mr Smith says that he would expect Meltwater’s major cost items to be similar in that regard.

45    All of these considerations at [36] to [44] of these reasons are said to go to the question of prejudice during the period of the interim licence. Mr Smith puts things this way in summary:

In my view, while the absolute cost of copyright fees is a significant factor in the viability of Isentia’s business, a more important factor is Isentia’s relative copyright costs, compared to the copyright costs of other market participants, particularly Meltwater. If Isentia is required to pay copyright costs that are significantly higher than Meltwater’s costs during the period between now and the final determination of this matter …, in my view it is inevitable that Isentia will continue to lose clients to Meltwater (and possibly also Streem) because Meltwater will be able to offer more competitive pricing that Isentia is unable to match.

46    Mr Smith also says this:

Once a client is lost to a competitor, it does not usually re-consider its media intelligence arrangements for at least one or two years. Further, in order to win back a client lost to a competitor, in my experience it is almost always necessary to offer the client a similar level of service at a lower price than Isentia previously charged that client. Consequently, if Isentia were to lose clients to Meltwater (or Streem) during the period between now and the determination of this proceeding, because it was not able to compete on price due to higher copyright costs, I would expect the impact of those lost clients on Isentia’s revenue to last well beyond the date on which the proceeding were determined, even if parity of copyright pricing was achieved on that date.

47    A large part of Mr Croll’s affidavit in support of the application for an interim licence is concerned with the chronology and content of the negotiations between CAL and Isentia in relation to the 2016 current CAL licence with Isentia. It is not necessary to examine all of the aspects of that chronology. Isentia says that it was put in a difficult position for two reasons.

48    First, the proposals from 2015 to the ultimate agreement reached for the 2016 licence, involved propositions from CAL for a substantial uplift in the licence fee based on a substantial minimum licence fee or a variable fee should use (based on the methodology in the licence) result in an amount greater than the minimum fee. The basis for the new fee and challenges to it were the subject of many exchanges.

49    Second, the negotiations involved Isentia addressing a proposition that unless it was willing to agree to a minimum fee (and related fee formulation) which reflected the attribution of value apparently reflecting the value News Corporation attributed to its content, News Corporation would withdraw access to its portfolio of mastheads. Isentia also says that propositions were put to it that provided it with very short deadlines to accept CAL/News Corporation proposals failing which it would need to adjust its business model to operate without access to News Corporation mastheads. Mr Croll examines in some considerable detail the sequence of exchanges concerning all of these issues including the steps taken by Isentia to press CAL to identify the basis for its attribution of value to the rights granted by the licence at the figure recited at #3. Mr Fairbairn, in his affidavit, responds in considerable detail to all of these matters and seeks to put the exchanges between CAL and Isentia in context as CAL sees it.

50    I simply note these matters. I can see no utility on this application in descending into the various point and counterpoint propositions about all of those matters. I accept, however, that there is obviously a serious contest between the parties about these issues and it may or may not be necessary in the principal proceeding to address all of these matters in detail.

51    However, there is one matter of relevance which should be mentioned.

52    One aspect of the negotiations involved a proposition from CAL that it was developing an “industry scheme” and that the new licence to be put to Isentia would reflect the position that “the new licence scheme will be an industry scheme”. CAL’s notion that new licence arrangements would involve an industry-wide scheme reflects a recognition that there ought to be a common industry-wide set of terms and conditions by which organisations using the relevant copyright content in their businesses could secure access to the copyright content on common terms and conditions. This seems to recognise the downstream dilemma in rivalry if one licensee secures access to content on one licence fee basis and other licensees obtain access on a different basis. In principle, access to the content from the upstream licensor ought to be on terms which enables rivals to secure access at a price which values the use of the copyright materials on a common basis. Normally, that would be likely to involve a fee calculation that bears a direct relationship with use. In that context, Mr Croll sent a letter dated 15 January 2016 to Mr Adam Suckling, the Chief Executive Officer of CAL, in response to Mr Suckling’s email dated 8 January 2016 in which Mr Suckling spoke about the new licence scheme on an industry-wide basis. In Mr Croll’s letter, he said that he noted Mr Suckling’s confirmation that the proposed new scheme would be an industry licence scheme and that:

On this basis, our understanding is that there will be a level-playing field for all prospective licensees. Could you please therefore confirm that the same flat fee licence fees are being offered to all prospective licensees under the new scheme.

53    The negotiations continued and, by 8 February 2016, Isentia and CAL had agreed upon a total minimum licence fee as described at #3. One of the terms recited in the “Term Sheet” of 8 February 2016 addressed the topic of “Pricing Parity” and it provided that “CA [CAL] will not offer a new equivalent licence on these or similar terms to any other organisation providing similar services for a less favourable licence fee unless CA [CAL] has first offered that fee to Isentia”.

54    Mr Croll says that on 9 February 2016 in a meeting with Mr Suckling and others to discuss the draft Term Sheet, Mr Suckling said that Meltwater’s then current agreements with CAL “would run to the end of 2017” [November 2017]. Mr Croll says that he was “shocked” by this news because he had understood from the discussions and correspondence that CAL and News Corporation were requiring Meltwater to also take a new licence pursuant to notions of an industry scheme with an uplift in fees “commensurate to that demanded of Isentia” and that News Corporation would nominate its mastheads as “Excluded Works” for the purposes of Meltwater’s licence with CAL if it did not agree to a corresponding uplift in the copyright licence fee. In an email to Mr Suckling the following day, Mr Croll said this:

Before going any further, we wish to record Isentia’s disappointment at the revelation that the Meltwater agreement continues to run until the end of 2017. As you know, parity with our competitors in dealing with CAL and the publishers has always been critical to Isentia and we have engaged in good faith negotiations on the basis that Meltwater would be subject to a similar re-negotiation of their licence with CAL. Therefore it is unhelpful to be informed at this late stage that Meltwater is not in the same position on pricing as Isentia.

55    In response to the pricing parity point, Mr Croll responded saying that “[g]iven Meltwater’s term does not conclude until December 2017, Isentia will not receive parity under the licence – what is CAL’s suggestion to deal with this?” In response, Mr Suckling said that CAL had offered to have third party verification that there is “competitive neutrality between the agreements in respect to licence fee charges”. He said that CAL had established that the licence to Meltwater would conclude in June 2017. It seems that the licence, in fact, continued until November 2017.

56    The current CAL licence with Isentia was executed on 8 April 2016 according to Mr Croll (at para 88 of his affidavit). The licence contains a clause described as a “most-favoured-nation” clause (a “MFN” clause) such that CAL will not offer a new licence or amend an existing licence providing equivalent rights on the same terms as the Isentia licence or similar terms, to any other organisation providing similar services for a more favourable licence fee unless CAL has first offered to Isentia a licence fee at that lower rate: see clause 6.10 in the Confidential Schedule. Isentia’s position, so far as this interim application is concerned, is that clause 6.10 has not been engaged by the interim order made in the Meltwater matter on 23 May 2018. Isentia says that that is so because CAL did not consent to the Meltwater orders but simply elected not to oppose the proposed orders sought by Meltwater. Isentia says, however, that the spirit of the MFN clause is clear in that it seeks to ensure that Isentia is placed on the same footing as any other licensee in terms of the licence fee in respect of what might be broadly said to be the grant of like-for-like rights.

57    These questions of parity in the licence fees are an important matter because Mr Croll says that Isentia’s copyright arrangements with CAL are sufficiently important to Isentia’s business (as a listed public company) that Isentia informs the market of any significant changes to those arrangements by releases through the Australian Stock Exchange. An example of such a release is exhibited to Mr Croll’s affidavit.

58    The term of the current CAL licence with Isentia was due to expire on 30 June 2018. In February 2008, Mr Croll commenced negotiations with CAL to discuss the terms of a licence that would apply from 1 July 2018. There were a number of exchanges with Mr Suckling and others about that matter. Those exchanges referred to consultations which were underway with both Streem and Meltwater on the terms of an industry model licence. An email from Mr Suckling on 9 April 2018 to Mr Croll provided an update on the status of those discussions. Mr Suckling advised Mr Croll on 20 April 2018 that those discussions with Meltwater were continuing although a proposed updated industry model would likely be available not long after 20 April 2018. On 16 May 2018, Mr Croll said that it was no longer feasible for Isentia to wait for the outcome of the discussions with Meltwater and Streem as Meltwater’s licence was to expire within about six weeks of that date. Other exchanges took place. Isentia commenced its proceedings and, pending the determination of the present application, CAL and Isentia agreed to an extension of the current CAL licence pending the determination of this application.

59    There can be no doubt that Isentia requires a licence pending the determination of the principal application to the Tribunal. That follows because Isentia has contracts with third parties, including its customers that include obligations and warranties that Isentia will obtain all necessary copyright licences to provide its services. Should Isentia operate without a licence from CAL, it would find itself in breach of its obligations and in some cases such conduct would enliven the rights of counterparties to terminate agreements.

60    There is some statistical information of relevance.

61    Mr James Ventura Orlando is the Chief Financial Officer at Isentia Group Limited, the holding company of Isentia. He swore an affidavit of 18 July 2018 in support of Isentia’s application for an interim order, which attaches confidential Exhibit JVO-1. It contains financial information for the years ending 30 June 2016, 30 June 2017 and 30 June 2018. The financial information also contains information relating to projections for the financial year ending 30 June 2019.

62    For the financial year ending 30 June 2016, payments to CAL represented #1414 of Isentia’s Australian revenue. The corresponding figures for 30 June 2017 and 30 June 2018 were #1515 and #1616. As to press clips, Isentia identifies #1717 clips for the 30 June 2017 year which amounted to #1818 of the figure at #5, and for the financial year ending 30 June 2018, the total press clips were #1919 representing #2020 of the figure at #5. Isentia has notified to CAL details of the volume of clips communicated by Isentia to downstream customers, both government and corporate, for the financial years ending 30 June 2017 and 30 June 2018. These figures are described by Mr Orlando as the “actual” downstream numbers. These numbers are lower than the number of press clips reported to CAL as communicated to downstream customers by Isentia, previously. The discrepancy between the reported number and the actual number, “has only come to Isentia’s attention very recently as part of its preparation for these proceedings”. Isentia says that the erroneous figures arose because of a duplication of a large number of press clips reported in particular customer categories so that some press clips appeared in two categories which suggested that more press clips were communicated than were actually communicated (the “duplication error”). So, the actual downstream clips communicated to customers in the year ending 30 June 2017 were #2121 and in the year ending 30 June 2018, the downstream press clips were #2222.

63    As to press clips, Isentia has calculated that it paid CAL #2323 per press clip identified for customers in the year ending 30 June 2017. This calculation was derived by dividing the minimum fee clips paid by Isentia being the amount at #4 by the total number of press clips identified by Isentia at #17. This resulted in an amount higher than the variable fee clips rate at #6 by the amount at #2424. Isentia says that if the subscription fee (in the “Press Monitoring” component of the licence fee at #3) is factored into the calculation being the amount at #2525, the rate per press clip rises to #2626 being an amount of #2727 above the variable fee clips rate at #6.

64    If the same calculation is done for the financial year ending 30 June 2018 by dividing the total minimum fee clips rate at #4 by the total number of press clips for that financial year at #19, Isentia has paid CAL the amount at #2828 as the per press clip rate which is the amount at #2929 higher than the variable fee clips rate at #6. If the subscription fee component is again taken into account (being the amount at #25), the rate per press clip for that financial year rises to #3030 being an amount of #3131 above the variable fee clips rate at #6.

65    As to the actual amounts paid by Isentia to CAL for communication of downstream clips for the financial years ending 30 June 2017 and 30 June 2018, the position is this. For the financial year ending 30 June 2017, Isentia paid CAL #3232 per clip for downstream corporate customers and it paid CAL #3333 for downstream government customers. For the financial year ending 30 June 2018, Isentia paid CAL #3434 per clip for downstream corporate customers and it paid CAL #3535 for downstream government customers.

66    As to the proportion that Isentia’s licence fee set out at #3 bears to Isentia’s total operating expenditure, the percentage for the financial years ending 30 June 2017 and 30 June 2018 is the percentage set out at #3636 and #3737, respectively. The CAL licence fee for each of those two financial years as a percentage of total revenue is #3838 and #3939, respectively. In the financial year ending 30 June 2016, the licence fee paid to CAL by Isentia was the percentage of total revenue at #4040.

67    As mentioned earlier, Mr Fairbairn has put on an extensive affidavit which addresses, apart from the matters already mentioned, the history of the early licensing arrangements between CAL and Isentia; CAL’s assessment of the changes in the market for the provision of media monitoring services and the nature of the evolution of those services; and aspects of announcements made by the Chairman of Isentia Group to the market by Stock Exchange releases and other statements. Mr Fairbairn’s affidavit also deals in considerable detail with the negotiation of the current CAL Isentia licence (and CAL’s preferred position of an industry wide model licence to apply to all licensees) and CAL’s approach to the reassessment of the basis for its nominated licence fee put forward in the negotiations with Isentia. In his affidavit, Mr Fairbairn seeks to answer in considerable detail the criticisms made by Isentia concerning the value attributed by CAL to the rights ultimately finding expression in the formulation of the licence fee, and the conduct complained of by Isentia in the way in which CAL (and News Corporation) sought to secure its preferred commercial position on the formulation of the licence fee. In his affidavit, Mr Fairbairn also comments extensively on material going to the financial performance of Isentia. That material seeks to demonstrate that there are a portfolio of reasons why it is that Isentia’s financial performance declined, so as to answer the criticism that the cause of the loss of clients and the corresponding decline in revenue is a function of the copyright cost incurred by Isentia under the 2016 licence. As already mentioned, I can see no utility in addressing, on this application, the serious questions raised inter-parties on those particular matters. I do, however, accept that it is unrealistic to describe Isentia as having “elected” to continue to engage in negotiations for the 2016 Isentia Licence and negotiations about the Licence Fee in circumstances where acquiring a licence was an essential precondition to the listed entity being able to continue to conduct its listed undertaking. CAL and Isentia are not in the position of an orthodox “willing seller” and “willing buyer” or, in this case, willing licensor and willing licensee. There are no “substitution possibilities” available to either Isentia, Meltwater or Streem in their negotiations with CAL.

68    As to Meltwater, Mr Fairbairn at para 75 of his affidavit says that at the present time in addition to Isentia, “the other full service MMOs operating in the Australian market” [emphasis added] are Meltwater and Streem. Mr Fairbairn seems to regard Meltwater as a full service MMO just like Isentia and Streem.

69    As to any point of differentiation between Isentia and Meltwater, Mr Fairbairn says in his affidavit that, without prejudice to the confidentiality of the licence between CAL and Meltwater, Isentia enjoysbroader rights across more territories compared to Meltwater”; [emphasis added]. That seems to be the extent of the articulated point of differentiation.

70    Isentia says that “as a matter of substance” the grant of rights to Meltwater and to Isentia by CAL are “essentially” the same “bundle of rights”, that is, “like for like”: T, p 10, lns 45-47; T, p 11, lns 1-12. Isentia says that there may be differences in the “express” overseas territories that may be the subject of rights but says that Meltwater “does overseas what we do” (T, p 11, lns 30) and thus “there may be issues about whether or not the CAL/Meltwater licence operates, in practice, in a way that is slightly different to the language in terms of territory” [emphasis added]: T, p 11, lns 30-33. Isentia says that CAL has not pointed to anything in its material that suggests a “lack of parity that matters”: T, p 11, lns 33-34. As to parity, Isentia says that Mr Croll, in his letter to Mr Suckling of 13 April 2017, observed that:

[i]t is evident from the services offered by Meltwater that even the online rights granted to Meltwater by CAL are broader than the online rights granted to Isentia under the CAL licence, and that the licence fees charged may be more favourable than those charged to Isentia.41

[emphasis added]

71    In response, Mr Suckling, in his letter dated 1 May 2017, said this:

Copyright Agency also rejects the assertion that the rights granted to Meltwater for online services are broader than those granted to Isentia and that Isentia has been treated less favourably. In fact, the rights licensed to Meltwater under their online agreement are slightly less extensive than those granted to Isentia. …42

[emphasis added]

72    Isentia’s contention is that while there may be “some differences” in the grant of rights, the differences are of a “de minimis character”: T, p 13, lns 25-26. In addition, Isentia says that, fundamentally, put anecdotally, the proof of the pudding is in the eating in the sense that Isentia’s experience has been that Meltwater has been successfully able to secure the clients formerly serviced by Isentia as set out at pp 47 to 52 of Mr Smith’s affidavit of 17 July 2018, as earlier described. Isentia says that Meltwater is, in fact, offering services which engage a like-for-like exercise of rights as between Isentia and Meltwater, derived from CAL.

73    As to the CAL/Meltwater agreements, CAL and Meltwater entered into a Scraping Licence commencing 1 December 2014. It was amended on 7 October 2016. CAL and Meltwater entered into a licence called Press Clipping Service Licence Newspapers and Magazines: Copying & Communication Rights (the “Press Clipping Licence”) on 12 October 2015. Both agreements had a term expiring on 30 November 2017, although Meltwater continued to exercise the rights on the terms of each document by arrangement after that date and then by order of the Tribunal. It is necessary to note some specific and particular things about the Scraping Licence and the Press Clipping Licence. Each licence is before the Tribunal without objection from CAL.

74    As to the Scraping Licence, Recital B says that it confers on Meltwater a licence to make Scraped Copies of Licensed Works and communicate Portions of Scraped Copies of Licensed Works in Australia for the purpose of providing a Scraping Service. The scope of the grant in clause 1.1 is set out in the Confidential Schedule together with the relevant definitions giving expression to the grant.

75    As to the Press Clipping Licence, Recital A recites that it is a licence to “Copy and Communicate the Licensed Works in Australia in the course of and for the purposes of providing a Press Clipping Service on the Licence Terms”. The relevant terms are set out in the Confidential Schedule.

76    In its Statement of Points in support of its application in proceeding CT2 of 2017 filed on 8 March 2018, Meltwater described itself as a “media monitoring, social media monitoring, and media intelligence organisation”. It then went on to explain the process by which its media monitoring service is provided to its customers in relation to “Licensed Works” by reason of the agreements it had held with CAL until 30 November 2017 (and thereafter by arrangements with CAL pending the determination of its proceeding in the Tribunal). Meltwater’s Statement of Points was made available to Isentia and it is before the Tribunal in this application. It contains confidential information and accordingly, the relevant sections are set out in the Confidential Schedule.

77    CAL’s response to Meltwater’s Statement of Points is not before the Tribunal on this application. However, a proper understanding of CAL’s response to Meltwater’s stated perception of the scope of its rights is undoubtedly a relevant matter and I propose to have regard to CAL’s document in response filed before the Tribunal on 18 May 2018. If necessary to identify the source of a power to do so (apart from the imperative of contextual necessity itself), s 164 of the Act confers a sufficient power to have regard to CAL’s document. In that document, CAL specifically addresses the points made by Meltwater at paras 10 to 21 of Meltwater’s Statement of Points. In that response, CAL does not expressly contest Meltwater’s assessment of the scope of its rights in respect of the Licensed Works. Rather, the response seems to recognise a relationship between what Meltwater says it does and Meltwater’s Scraping Licence and its Press Clipping Licence. CAL’s response at paras 11, 12 and 13 are set out in the Confidential Schedule. Paragraph 12 of the response recognises the relationship between CAL’s grant of rights to Meltwater and Meltwater’s primary business offerings; the significance of the rights in driving customer uptake of Meltwater’s services; and the significance of that last circumstance to Meltwater’s earnings.

78    Isentia says that that which it is licensed to do is contained in one document and in Meltwater’s case, the like-for-like rights are to be found across a consideration of both of Meltwater’s licences.

79    CAL contests the proposition that the scope of the rights granted to Isentia and Meltwater are the same or materially the same.

80    CAL says that no question of a consideration of differential licence fees arises so as to address contended distortions in the market for the provision of media monitoring and media intelligence services in circumstances where the rights granted to Isentia and Meltwater are, in truth, materially different. The material difference is said to arise in this way (without disclosing too much detail here). The grant of rights to Isentia under the current CAL/Isentia Licence contemplates a right to “Copy and Communicate Licensed Works” and make a “Scraped Copy and Communicate a Portion” as contemplated by clause 1.1(a) and (b). Clause 1.1(c) contemplates the creation of a “searchable archive” and clause 1.1(d) contemplates “use” of that archive in the recited way. As to a “Press Clipping Service” as described in the Meltwater Press Clipping Licence (otherwise described as a “Press Monitoring Service” for the purposes of the Isentia Licence), the Meltwater right to “Communicate” “Licensed Works” is defined in such a way as to exclude “the right to make a work available online”. On the other hand, the term “Communicate” in the Isentia Licence is defined in terms of the definition in the Act. The term “communicate” in the Act means, relevantly for present purposes, “make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject-matter …”.

81    CAL says that that definition contemplates two classes of rights. The first is the act of making a relevant work or other subject matter “available online” and the second is the act of “electronically transmitting” a work or other subject matter. Those two classes of rights fall within the grant to Isentia but in the case of Meltwater the right to “make a work available online” is expressly withdrawn from Meltwater. So, apart from the issue about the “Territory” and the matter addressed at [82] of these reasons concerning the searchable archive, the major point of differentiation is said to be that Meltwater in providing a Press Clipping Service, cannot make a work available online.

82    Thus, the rights conferred upon Isentia are said to be wider or more expansive than the rights conferred upon Meltwater (at least so far as the Press Clipping Licence is concerned). Moreover, the rights are said to be wider in Isentia’s case because those rights comprehend creating a searchable archive and use of a searchable archive (as explained in the text in the Confidential Schedule).

83    Thus, CAL says that it follows that the Licence Fee payable to Isentia for the wider rights would necessarily be different to the Licence Fee payable by Meltwater for its narrower class of rights, as described by CAL.

84    CAL says that the question of whether there is a material difference in the grant of the rights in each case is to be determined by looking to the agreements and the text of the agreements. CAL says that it may be that Meltwater does more than it is entitled to do or that it has a perception that it can do more than it is entitled to do but ultimately the question of whether there are material differences necessarily comes down to a consideration of whether the field of rights granted to Isentia are materially different to the rights granted to Meltwater, before any analysis of a differential Licence Fee arises.

85    Apart from these considerations, CAL says that there are significant differences in the complexities associated with downstream licences struck by each licensee as an agent for CAL with customers of Isentia and Meltwater. In the case of Isentia, downstream licences contemplate government and corporate licensees. As to those licences, the licence fees are those described at #4143. In the case of Meltwater, there is no differentiation between “Corporate” and “Government” users, with the result that the Licence Fee is as described at #4244. As to the downstream licences put in place by Meltwater as agent for CAL, the matters at #4345 are relevant in terms of understanding Meltwater’s contention at para 31 of its Statement of Points as set out in the Confidential Schedule.

86    Another difference CAL points to is that the grant of the licence to Isentia enables it to do things as described at clause 1.1 for a particular period of time whereas the Scraping Licence granted to Meltwater enables it to do the relevant things for half of the period enjoyed by Isentia under its licence. CAL also says that it should be remembered that the current CAL/Isentia Licence was entered into in April 2016 and at that time, the Meltwater Press Clipping Licence was already in existence, having been entered into on 12 October 2015, with the result that the distortions now sought to be addressed are, in part at least, a legacy of the differences in treatment in relation to the licence fees payable under each instrument as negotiated at the relevant time reflecting the respective allocation of rights, duties, entitlements and obligations under each instrument.

87    Isentia maintains its position that these differences now identified by CAL in its written and oral submissions are “de minimis” and are said to “pale” in comparison with the Licence Fee payable by Isentia on an interim basis should the current CAL/Isentia Licence be extended pending the hearing, without any adjustment to the Licence Fee formulation. Isentia’s primary submission is that the current licence should be extended on an interim basis but with variations to Annexure A to the Licence in the way set out in the Confidential Schedule46. As already mentioned, Isentia says that the effective or actual rate per clip for the financial year ending 30 June 2017 was the amount at #26 being an amount at #27 above the rate at #6 and the effective or actual rate for the financial year ending 30 June 2018 was the amount at #30 being the amount at #31 above the rate at #6. Isentia says that the effective rate at #30 exceeds Meltwater’s per clip rate at #4447 by the amount at #4548.

88    Isentia says that this differential in the per clip rate for Press Monitoring together with the minimum fee for Online Monitoring and the minimum fee for Downstream use is the source of significant differential treatment as between Isentia and Meltwater. It says that when the question is whether the terms of the current CAL/Isentia Licence ought to be extended pending the hearing, that question engages a question of whether it is a reasonable or appropriate exercise of the power conferred by s 160 of the Act to extend that licence without taking into account the interim prejudicial consequences of the different Licence Fee regimes as between Isentia and Meltwater.

89    I accept that having regard to all of the affidavits there is at least a serious question as between the parties as to whether the different Licence Fee provisions concerning the Isentia current licence and the Meltwater current arrangements give rise to distortions in rivalry in the market for the provision of each entity’s services. The extensive loss of the substantial clients set out in the Schedule in the material (with other references in the text of the affidavits) from Isentia to, in the main, Meltwater, is at least consistent with an advantage that Meltwater enjoys in the Licence Fee it pays for the grant of the rights it enjoys.

90    It is, however, necessary to say something about other evidence referred to in the affidavit of Mr Fairbairn which suggests that a range of factors informs the financial performance of Isentia. Mr Fairbairn addresses this topic in considerable detail, the effect of which is to squarely put in serious contention the notion that Isentia’s financial performance is related in a causal way to the copyright cost of the licence granted to it as compared with the copyright cost incurred by Meltwater. As to that, I note all of the observations of Mr Fairbairn and related documents at Part D of his affidavit. However, I propose to note here some of the observations made by Isentia in annual reports and media releases since entry into the current CAL/Isentia Licence in April 2016. The 2016 Annual Report notes a continuation of Isentia’s outstanding financial performance with a 23% year-on-year revenue increase and the contribution to earnings as a result of the newly acquired “King Content” entity.

91    On 17 November 2016, the Chairman of Isentia Group delivered an address at the AGM emphasising Isentia’s success in reducing churn rates. On 22 February 2017, the Isentia Group released its half yearly results for the 2017 financial year which note a marginal decline in EBITDA “reflecting higher copyright expenses that were unable to be fully offset by price increases due to [the] [i]ncreased competitive environment that impacted November and December client contract renewals”. The report notes a client churn rate at 6% of client numbers and 2% of client revenue with an impact in November and December. The report notes a “revenue decline of 11% reflecting the loss of a number of clients” and, as to key operating expenses, the report observes that “operating expenses excluding Content Marketing increased 10% reflecting a $2.5 million step-up in copyright expenses and increased investment in [t]ransition to cloud technology [and] continued investment in R&D roles to deliver world leading SaaS platforms”.

92    On 23 August 2017, a presentation was given on behalf of the Isentia Group in relation to its results for the full financial year 2017. In that presentation, observations were made that Australia and New Zealand revenue had been impacted upon by customer churn and competition during the year “relating to the copyright agreement”. It notes an increase in expenses “mainly due to $5.3m copyright cost increase and acquisition related costs in Asia”. It notes that copyright payments “are stable for FY18” and that “[c]lient retention is strong with stable client numbers in [quarter] 4” and as to “Copyright” the presentation observes that there has been a cost increase “due to CAL renegotiation”; an “[o]perating cost increase ex CAL of 3.2%” and the “outlook for FY18” is “[s]table”. At the AGM on 23 November 2017, the Chairman of Isentia Group gave an address in which he said these things:

FY18 was a mixed year for Isentia. Revenue was slightly below the prior year with strong growth in Asia and our Insights business largely offsetting a decline in revenue from King Content.

Revenue from our Australia and New Zealand media intelligence business was marginally higher year on year which was a good result given the impact of Isentia’s increased copyright costs. This cost increase led to an uneven competitive landscape as our competitors did not face the same cost hike.

This limited our ability to pass it on to our customers and resulted in a higher rate of customer churn.

FY17 EBITDA of $41.5m fell by 19% largely due to these factors and a $4.5m loss at King Content.

Underlying [net profit – NPATA] of $24.7m was 24% lower than the previous year.

Finally, although FY17 was in some respects a difficult year, our core business remains strong – competitive pressures in the ANZ market have eased, and our Asian and Insights businesses continue to deliver solid growth. Isentia remains a high cash flow business with strong predictability of revenues and a solid balance sheet.

93    At the AGM on 23 November 2017, Mr Croll said this:

We know that our copyright costs for FY18 are fixed at the same rate as FY17, which provides certainty for this fiscal year.

Before turning to our FY18 outlook I want to remind shareholders of one of the most attractive features of Isentia, and that is its strong cash flow generation. 73% of revenue from our core business is recurring and operating cash flow increased in FY17 allowing us to reduce debt in the second half despite a challenging competitive environment.

94    In the 2017 Annual Report, these observations are made:

While 2017 Financial Year (“FY2017”) has been a challenging and formative year for Isentia, we are confident that the decisions we made to achieve our longterm strategy have been the right ones for both clients and shareholders.

Throughout this formative year, we encountered challenges in the transition of our content business, met copyright adjustments for the Australian business, and thus reported a lower profit than expected, a disappointing overall result. However, I am pleased to report that through FY2017 the fundamentals of the business remained strong – including a strong balance sheet and solid cash conversion.

For the content business, there was transitional difficulty, not in the quality of the services it delivered to clients, but as it transitioned from founder management into an integrated business within Isentia. The performance also fell short of expectations, with a decline in both top-line revenue growth and margin.

Content Marking, as noted, was a drag on the results as it transitioned into the business and service model, taking the result back this year with a 30% decline and $4.5m EBITDA loss. We expect this to begin to make [a] positive contribution as part of the integrated model this year. In Australia, despite copyright renegotiation impacts, the Media Intelligence business still grew 1% and we have maintained our competitive advantage.

95    In a presentation given on 26 February 2018 by the Isentia Group in relation to the half yearly results for the 2018 financial year, an observation is made that increases in expenses are “mainly related to staff cost” and, as to the Media Intelligence business, this was said:

Isentia continues to generate steady cash flow from its Media Intelligence business. Total subscription customer numbers have stabilised. 72% of Isentia’s revenue is recurring with low customer churn of 2.4%.

96    In a presentation given on 21 August 2015 by the Isentia Group concerning the results for the 2015 financial year, the observation was made that the King Content acquisition had provided an opportunity to leverage the Isentia client base, access additional marketing budgets and become a market leader in the “rapidly growing content marketing segment”. The acquisition was said to result in an Isentia-King Content combination providing “a unique service across earned, owned and paid media that will further diversify Isentia’s revenue streams in another high growth market segment and extend the services …”. In August 2017, Isentia announced that it would be closing the King Content business. As to that, one article in the financial press of daily record49 contained these observations:

[O]n Tuesday, Isentia, which was formerly known as Media Monitors, revealed it will shut the King Content business down due to its poor performance, fold its remnants back into Isentia’s remaining content business and write down King’s value by $37 million, to zero.

Isentia shares tumbled 23 per cent in early trade to $1.71. The stock has lost a third of its value since the start of the year.

On an investor call early Tuesday morning, Mr Croll was challenged to explain why the performance of King Content in 2016-17 had deteriorated from a $2 million loss in November 2016, to a $3 million loss in February 2017, to a $4.4 million loss for the full year.

97    Notwithstanding the observations in the presentation on 26 February 2018 that Isentia was continuing to generate steady cash flow from its Media Intelligence business with stabilised total subscription customer numbers, and 72% of revenue recurring with low customer churn of 2.4%, Isentia says that it is suffering prejudice in the downstream Media Intelligence business market by its loss of clients due to pricing advantages Meltwater enjoys brought about in part by differential copyright licensing costs and that, on an interim basis, prejudice so arising ought to be addressed in setting the terms of a licence pending the hearing. There are some references in the various presentations to the role of the copyright costs in Isentia’s business undertaking. Isentia says that this is an exercise which does not engage any qualitative analysis of the merits of a particular licence fee but simply seeks to set a licence fee, for an interim licence, which addresses the evidence and contentions on prejudice.

98    Isentia also says that because it regards the matters of contended “material differences” in the scope of the rights granted by CAL to Isentia and Meltwater emphasised by CAL, as distinctions without a difference or “de minimis” differences, it says that on an interim basis it is willing to accept precisely the same scope of rights enjoyed by Meltwater which would then address the so-called material differences and on that footing, or on those terms, Isentia ought to be paying the same licence fee as Meltwater, pending the determination of the principal application(s). Isentia says that this approach would then enable the contended distortions brought about by differences in the upstream copyright cost to be addressed if the so-called material differences are thought to be a principled basis for differences in the Licence Fee in each case.

99    As to the question of material differences, I accept that there are certainly textual differences in each relevant licence concerning the character of the rights granted to Isentia, on the one hand, and Meltwater, on the other hand, as described at [80] – [82] and [85] – [86] of these reasons. However, I am not satisfied that these textual differences make a significant practical working difference having regard to those things that Meltwater actually does in providing to clients its media intelligence services as compared with those things which Isentia does. In that regard, I note particularly Meltwater’s own statement of its activities in relation to the Licensed Works as set out in the Confidential Schedule and CAL’s response which does not seek to challenge the content of that statement of Meltwater’s activities. In fact, CAL seems to embrace those activities as a basis, no doubt, for arguing that Meltwater ought to be paying a substantial industry-wide licence fee.

100    I also accept that there seems to be no rational or principled basis for differential treatment in the licence fees, on an interim basis pending the determination of the principal applications, paid by Isentia and Meltwater for the exercise of the rights once it has accepted that the textual differences do not seem to be giving rise to a real difference in that which is offered by Isentia as compared with that which is offered by Meltwater at least in terms of exercising rights in relation to Licensed Works.

101    I also accept that Isentia has lost a number of significant clients to Meltwater and that the differential copyright cost is at least an element of substance in that outcome. Human experience of rivalry in markets is that once a client is lost to a rival, it is likely to take real time and effort to win back that client, if at all. This is another feature of prejudice. Some examples of the clients lost by Isentia to Meltwater and the grading or significance of those clients to Isentia is set out in the Confidential Schedule.

102    If the textual differences in each of the licence arrangements with Isentia and Meltwater as to the grant of rights are, in fact, material, it seems to me that those material differences can be smoothed out by establishing, on an interim basis, terms of a licence by CAL to Isentia on the same terms as the licence granted to Meltwater, as to the character of the rights granted to each licensee. Isentia says that it is willing to be put on the same footing as Meltwater as to that matter. Once a licence is granted to Isentia in respect of the same class of rights licensed to Meltwater, it would seem to follow that there ought to be a licence fee payable by Isentia, during the interim period, which reflects the same licence fee paid, in substance, by Meltwater.

103    CAL recognises that there ought to be, in the long term, an industry wide licence on industry wide terms common to all licensees. An interim licence on the footing just described is, in some senses at least, a step along the way to recognising the importance of common terms as between CAL and licensees although, of course, there will be a great debate about how the rights are to be valued and how the Licence Fee is to be framed in a way which reflects the proper value to be attributed to the rights exercised by the licensees. That debate will, no doubt, take account of all of the things Mr Fairbairn addresses in his affidavit concerning the changing nature of the industry and the various methodologies to be adopted in attributing value to these very important rights for the rightsholders.

104    The qualification upon this approach as to an interim licence is that whilst such an approach establishes common terms based on the Meltwater licence (as to the character of the rights granted under each licence and related matters) which has the effect of addressing contended material differences in the rights conferred upon each licensee (said to be the contended foundation for differential licence fees), prejudice also flows to CAL because, in the interim, it will be deprived of the cash flows referable to the Licence Fee protocol set out in the current CAL/Isentia Licence had that licence simply been extended on an interim basis until the determination of Isentia’s application along with the other applications. Although an interim licence on the basis suggested addresses the contended prejudice flowing to Isentia, it is also necessary to address the prejudice to CAL in being deprived, on an interim basis, of the full amount of the licence fee formulation based on the 2016 Licence (which, of course, had expired on 30 June 2018), had that licence continued on an interim basis reflecting the same formulation of the Licence Fee. The difference between the effective or actual licence fee paid by Isentia and that paid by Meltwater is the amount at #45.

105    In order to provide CAL with some relief from what would be the deprivation of the full difference at #45, the per clip licence fee to be paid by Isentia is to be the amount at #46.50 A per clip rate at that amount goes some way at least towards smoothing out the differential rate as between Meltwater and Isentia and yet provides a continuing contribution to CAL’s cash flow deprivation that would occur if the per clip rate was merely the amount at #44.

106    The discussion of this per clip rate is concerned with the rate payable in the exercise of rights under the Press Clipping Licence. The other aspect of Meltwater’s rights relates to the Scraping Licence and relevantly for present purposes, cl 4.2 of the Meltwater Licence sets out the relevant licence fee for the term. If a construct was to be developed of an analogous number relevant to cl 4.2(d), the analysis might go along these lines. Leaving aside the amount at cl 4.2(a) referable to the first seven months of the licence from the commencement date (effective 1 July 2016), cl 4.2(d) established a licence fee for the period from 1 July 2017 to 30 November 2017 in the amount at #47.51 That formulation represents, as to the nominated “greater amount”, an amount per month of #48.52 For the first three months of an interim licence for the months of, say, December 2018 and January and February 2019, the nominated amount, as the “greater” amount would be the amount at #49.53 On that basis, the licence fee payable by Isentia for those three months would be the amount set out at #50.54 Of course, the particular nominated dollar amounts at cl 4.2 are a function of, no doubt, benchmarks specifically relevant only to Meltwater. However, those dollar amounts are cast as the greater of that amount or the relevant percentage set out at #50 and therefore on an interim basis the relevant formulation for the Isentia Licence is the percentage of gross revenue set out at #50.

107    As to downstream licences and the Downstream Licence Fee, cl 4.4 of the Meltwater Agreement contemplated that fees payable to CAL for the period 1 January 2017 to 30 November 2017 would be the amount at #5155 resulting in an amount per month of #5256 which for a three month period constitutes the amount at #53.57 Again, these specific dollar numbers, however, are relevant only in the context of numbers referable to the particular entity, Meltwater. The numbers in relation to Scraping Services as the nominated “greater” amount only has relevance to Meltwater but, as mentioned, in that case there is an alternative which engages a percentage of revenue which is the relevant measure for the Isentia interim licence.

108    However, there is no such alternative in relation to the Downstream Licence Fee and that being so, it makes sense to determine the fee payable to CAL in respect of “Downstream use” as an amount based on the application of CAL’s rate card.

109    The Tribunal proposes to establish an interim licence in favour of Isentia to apply for the months of December 2018 and January and February 2019 and then review the position with a view to establishing a further licence for a further period of three months for March, April and May 2019 and then, if necessary, for a further period thereafter until the determination of the principal applications. The hearing of the principal applications will need to be expedited so that final terms and conditions might be established. The parties ought to caucus about proposed directions for bringing the applications to a hearing as soon as is practicably possible.

110    The terms of the interim licence for December 2018 and January and February 2019 ought to include a provision to the effect that should the Tribunal establish terms and conditions of a licence which contain a higher rate of licence than that prevailing in the interim period, the higher rate of licence will be paid by Isentia as from 1 December 2018 and, correspondingly, should the Tribunal determine a lower rate of licence fee, Isentia would be entitled to recoup the difference between that paid and the lower rate.

111    It seems, impressionistically at least, that it is unlikely that the Tribunal will determine a lower rate of Licence Fee than the interim Licence Fee.

112    This discussion has focused upon all of the issues raised by the interim application and the particular position as between CAL and Isentia on the one hand and CAL and Meltwater on the other hand and the comparative position as between Isentia and Meltwater in that context. The position of Streem is a relevant matter. An interim licence was established in favour of Streem on 28 June 2018 and the considerations relevant to that matter are discussed in Application by Streem Pty Limited [2018] ACopyT 1.

113    In the case of Streem, an interim licence was established as an exercise of power under s 160 of the Act by extending the pre-existing licence. In terms of the interim arrangements relating to Streem, the Tribunal regarded as very influential the circumstance that the parties had recently struck a bargain on two separate occasions in which Streem itself had elected to extend the licence on the terms of a particular bargain. In the case of Isentia, the 2016 Licence was struck in April 2016, that is, two and a half years ago.

114    The Tribunal also observed that a particular fee structure applicable in an interim arrangement might well operate differentially as between a mature business and a new entrant business. So far as that principle is concerned, it has no application here as Meltwater is not a new entrant business undertaking. It is a mature participant in the market and it has established a market share of about 30%.

115    The orders in the Streem matter make provision for liberty to apply. If questions about the Streem licence arise, it may be that that order is utilised in some way.

116    The parties will be directed to confer for the purposes of submitting proposed orders to the Tribunal within two weeks.

I certify that the preceding one hundred and sixteen (116) numbered paragraphs are a true copy of the Reasons for Determination herein of the Honourable Justice Greenwood, President, Australian Copyright Tribunal

Associate:

Dated:    16 November 2018

  1. Item 1 in the Confidential Schedule

  2. Item 2 in the Confidential Schedule

  3. Item 3 in the Confidential Schedule

  4. Item 4 in the Confidential Schedule

  5. Item 5 in the Confidential Schedule

  6. Item 6 in the Confidential Schedule

  7. Item 7 in the Confidential Schedule

  8. Item 8 in the Confidential Schedule

  9. Item 9 in the Confidential Schedule

  10. Item 10 in the Confidential Schedule

  11. Item 11 in the Confidential Schedule

  12. Item 12 in the Confidential Schedule

  13. Item 13 in the Confidential Schedule

  14. Item 14 in the Confidential Schedule

  15. Item 15 in the Confidential Schedule

  16. Item 16 in the Confidential Schedule

  17. Item 17 in the Confidential Schedule

  18. Item 18 in the Confidential Schedule

  19. Item 19 in the Confidential Schedule

  20. Item 20 in the Confidential Schedule

  21. Item 21 in the Confidential Schedule

  22. Item 22 in the Confidential Schedule

  23. Item 23 in the Confidential Schedule

  24. Item 24 in the Confidential Schedule

  25. Item 25 in the Confidential Schedule

  26. Item 26 in the Confidential Schedule

  27. Item 27 in the Confidential Schedule

  28. Item 28 in the Confidential Schedule

  29. Item 29 in the Confidential Schedule

  30. Item 30 in the Confidential Schedule

  31. Item 31 in the Confidential Schedule

  32. Item 32 in the Confidential Schedule

  33. Item 33 in the Confidential Schedule

  34. Item 34 in the Confidential Schedule

  35. Item 35 in the Confidential Schedule

  36. Item 36 in the Confidential Schedule

  37. Item 37 in the Confidential Schedule

  38. Item 38 in the Confidential Schedule

  39. Item 39 in the Confidential Schedule

  40. Item 40 in the Confidential Schedule

  41. This extract comes from p 187 of Mr Croll’s affidavit

  42. This extract comes from a letter forming part of Confidential exhibit JIF-3. I quote it here as an expression of opinion by Mr Suckling (and therefore CAL). The comment can be quoted here as it does not disclose any specific detail or text concerning the grant of rights.

  43. Item 41 in the Confidential Schedule

  44. Item 42 in the Confidential Schedule

  45. Item 43 in the Confidential Schedule

  46. Isentia’s proposed restructure of the Licence Fee is described in the Confidential Schedule

  47. Item 44 in the Confidential Schedule

  48. Item 45 in the Confidential Schedule

  49. Article, Australian Financial Review, 1 August 2017 by Mr James Thomson

  50. Item 46 in the Confidential Schedule.

  51. Item 47 in the Confidential Schedule

  52. Item 48 in the Confidential Schedule

  53. Item 49 in the Confidential Schedule

  54. Item 50 in the Confidential Schedule

  55. Item 51 in the Confidential Schedule

  56. Item 52 in the Confidential Schedule

  57. Item 53 in the Confidential Schedule