Small application, streamlined track: copyright licences hit the fast lane

The first decision on the small applications track in the UK's newly-streamlined Copyright Tribunal was handed down on 3 May 2011 in Archive Media Publishing Ltd v MCPS. The dispute involved the operation of the royalty provisions in the Mechanical Copyright Protection Society (MCPS) licence scheme DVD1, which it uses for those who manufacture and distribute DVDs that contain copyright material. Of significance is that the Tribunal (Judge Colin Birss QC, Mrs Sam Madden and Mr Manny Lewis) decided the case entirely by written submissions and not by a hearing.

Archive Media Publishing Ltd (AMP) accepted the terms of the DVD1 licence on 16 August 2010. As for the royalty payments, the DVD1 licence provided that these would be paid on ‘pay as you go’ (PAYG) terms. That is, that AMP would pay monthly instalments to MCPS by direct debit at a level by reference to AMP’s estimate of the likely first year royalty. Without the PAYG terms, the DVD1 licence would have essentially extended credit AMP by allowing it to make payments quarterly in arrears on DVD pressings in that quarter. Soon after accepting the terms of the DVD1 licence, AMP claimed that the PAYG terms were unfair and discriminatory on the basis that its main competitors enjoy the benefit of the DVD1 licence without the PAYG terms.

On 20 September 2010, AMP commenced the proceedings to refer the licensing scheme to the Copyright Tribunal under s 119 of the Copyright Designs and Patents Act 1988 and to apply for a grant of a licence under s 121 of the Act. AMP submitted that it was entitled to the DVD1 licence without the PAYG terms. Not surprisingly, MCPS submitted that it was entitled to require a new licensee like AMP to take the DVD1 licence on PAYG terms. In the course of its submissions, AMP explained how the PAYG term in the DVD1 licence had operated to date. AMP estimated that royalties for the year would be £20,000. Under the PAYG terms, AMP had paid £6,668 by December 2010, where as due to a delay in production, only £23.17 royalty was due without the PAYG terms. A quarterly reconciliation between MCPS and AMP allowed the problem to be sorted out.

The Tribunal dismissed AMP’s applications and found that no unreasonable discrimination had taken place in the circumstances for several reasons. First, the MCPS were entitled to treat licensees which are small companies and/or lesser financial standing differently from other licensees provided the manner in which they do so is reasonable. Accordingly, MCPS could grant the DVD1 licence conditional on terms like PAYG which were in effect a form of financial guarantee. Secondly, as AMP was a small company which did not have a track record with MCPS, this was sufficient for MCPS to require the PAYG terms to be included in AMP’s DVD1 licence. Thirdly, the fact AMP had satisfactory bank references was not sufficient to mean that the MCPS were not entitled to require PAYG terms. Fourthly, the Tribunal accepted the submission that the MCPS had a duty to its publisher and writer members to ensure that their interests are protected and to safeguard the collection of royalties derived from the exploitation of their works. Fifthly, how the PAYG term had operated in this case was not evidence that the term was unreasonable.

In closing, the Tribunal also observed that the PAYG terms in the DVD1 licence were not as clear as they could be. It recommended that the MCPS seriously consider preparing a brief written statement of what the PAYG terms are, how they operated and that the payment level is reviewable.

The IPKat hopes that this is the first of many decisions under the small applications track which reduce costs and time in having copyright licences reviewed.