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Monday, 24 November 2008

Pubs drink the health of High Court judge

The British Beer and Pub Association (BBPA) and the British Hospitality Association (BHA) are lifting their glasses to drink the health of Mr Justice Kitchin after he upheld their appeal against the decision of the Copyright Tribunal on the basis for the calculation of fees which their members have to pay for background music. The decision in Phonographic Performance Ltd and the appeal of the British Hospitality Association and other interested parties [2008] EWHC 2715 (Ch) was handed down on Friday. You can read it in full on BAILII here, or you can read shorter, less legalistic accounts from The Morning Advertiser and The Publican.

What was the dispute all about? As Kitchin J explained, it wasn't just about the money -- there was a serious issue relating to jurisdiction to deal with too:

"This dispute has arisen in the context of references made to the Tribunal by the Secretary of State of various new licensing schemes issued by PPL for the licensing of the public performance as background music of sound recordings in public houses, bars, restaurants, cafes, shops, stores, factories and offices. These schemes were developed by PPL following an amendment to section 72 of the CDPA [Copyright, Designs and Patents Act 1988] ... This removed what was perceived to be an anomalous gap in the protection afforded to sound recordings which allowed commercial entities to play broadcasts of those sound recordings within their premises without the permission of the copyright owners. The recordings now protected are referred to as "excepted recordings", reflecting the fact that they are excepted from the free use rights otherwise afforded by that section.

The new licensing schemes in issue are "delivery system neutral", that is to say they are not limited to the licensing of broadcast sound recordings but extend to all ways of playing background music in public, such as by CD or tape. This makes obvious sense and is an approach which is, at least in principle, supported by all the parties before me. It means that licensees do not need to take separate licences in respect of different delivery systems for the same recordings. However, the parties are deeply divided over the fees which PPL is charging. The Interested Parties say the new schemes represent a very substantial departure from the established tariffs in respect of non broadcast sound recordings and that PPL has sought to take advantage of the amendment to section 72 to introduce an unprecedented and wholesale increase in its rates. PPL contends that the new schemes are entirely reasonable having regard to, inter alia, comparable licences granted by the PRS, the commercial value of the public performance of sound recordings, the factors which must be taken into consideration .. and that, for many users, the new schemes contain increases that amount to only a few pounds per year.

... PPL submitted the new schemes to the Secretary of State ... . ... [who] referred them to the Tribunal. Thereafter, matters proceeded through the course of 2006 with the parties submitting detailed representations and skeleton arguments until ... HH Judge Fysh QC, as Chairman of the Tribunal, wrote to the parties expressing concerns about the extent of the Tribunal's jurisdiction and asking for a hearing. After a good deal of correspondence and a case management conference, the hearing took place on 8 November 2007 and gave rise to the decision against which both parties now appeal. In summary, the Tribunal held that

(i) a reference under section 128A is limited to a consideration of a licensing scheme in so far as it concerns the public performance of broadcast sound recordings only; and
(ii) the Tribunal has no power under section 128B to order back payments in respect of users who use sound recordings not contained
in a broadcast.

It also rejected the new schemes on a summary basis because they were not limited to licences to play broadcast music in public and indicated that the use of recordings delivered other than by broadcast remains covered by the established tariffs".

Kitchin J held that the Copyright Tribunal does have powers under the Copyright, Designs and Patents Act 1988 to set the value of both broadcast and non-broadcast music in one tariff. The opposite conclusion, apart from being unsupported by the law itself, would be "inconvenient, cumbersome, expensive, and involve a waste of judicial and public resources". The powers include the power to order back payments, but that was not a viable option in this situation. On the plus side from the PPL's point of view, the contention that those pubs that do not wish to play broadcast recorded music should be entitled to a refund was also rejected. The judge concluded by setting aside the decision of the Tribunal and remitting the references to a freshly constituted Tribunal for further consideration and directions in the light of his judgment.

The IPKat says, from an economic point of view this is a tough one to call. The recorded music industry and Britain's pubs are both endangered species and one might be forgiven for speculating as to which will survive the longest in the current commercial and techno-climate.

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