Chappell & Company Ltd v Nestlé Company Ltd

JurisdictionEngland & Wales
JudgeViscount Simonds,Lord Reid,Lord Tucker,Lord Keith of Avonholm,Lord Somervell of Harrow
Judgment Date18 June 1959
Judgment citation (vLex)[1959] UKHL J0618-2
Date18 June 1959
CourtHouse of Lords
Chappell and Company Limited and Others
and
The Nestlé Company Limited and Others

[1959] UKHL J0618-2

Viscount Simonds

Lord Reid

Lord Tucker

Lord Keith of Avonholm

Lord Somervell of Harrow

House of Lords

Upon Report from the Appellate Committee, to whom was referred the Cause Chappell & Company Limited and others against The Nestlé Company Limited and others, that the Committee had heard Counsel, as well on Monday the 27th, as on Tuesday the 28th and Wednesday the 29th, days of April last upon the Petition and Appeal of Chappell & Company Limited, whose registered office is at 50 New Bond Street, London, and Winneton Music Corporation, a Corporation organised under the laws of the State of New York, United States of America, and carrying on its business at 1619 Broadway, New York, in the State of New York aforesaid, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 19th of March 1958, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, and that the Petitioners might have the relief prayed for in the Appeal, or such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the printed Case of The Nestlé Company Limited and Hardy Record Manufacturing Company Limited, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 19th day of March 1958, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Order of the Honourable Mr. Justice Upjohn of the 14th day of November 1957, thereby discharged, be, and the same is hereby, Restored: And it is further Ordered, That the Respondents do pay, or cause to be paid, to the said Appellants the Costs incurred by them in the Court of Appeal and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Viscount Simonds

My Lords,

1

This appeal raises a question of construction of the Copyright Act, 1956, upon which there has been a difference of opinion in the Courts below, the Court of Appeal by a majority (Jenkins and Ormerod, L.JJ., Romer, L.J. dissenting) having reversed the decision of Upjohn, J.

2

The facts are not in dispute and the action was tried without pleadings upon an interlocutory motion which by consent was treated as the trial of the action. The Appellants Winneton Music Corporation are the owners, and the Appellants Chappell & Company Limited their exclusive licensees, of the copyright in a musical work entitled "Rockin' Shoes". The question is whether the Respondents The Nestlé Company Limited and Hardy Record Manufacturing Company Limited (whom I will call "the Respondents Nestlé" and "the Respondents Hardy") have infringed this copyright. It is common ground that they have done so unless they are protected by section 8 of the Copyright Act, 1956. I will therefore set out that section and then state such further facts as appear to be relevant. Section 8 is as follows: —

"8.—(1) The copyright in a musical work is not infringed by a person (in this section referred to as 'the manufacturer') who makes a record of the work or of an adaptation thereof in the United Kingdom, if—

( a) records of the work, or, as the case may be, of a similar adaptation of the work, have previously been made in, or imported into, the United Kingdom for the purposes of retail sale, and were so made or imported by, or with the licence of, the owner of the copyright in the work;

( b) before making the record, the manufacturer gave to the owner of the copyright the prescribed notice of his intention to make it;

( c) the manufacturer intends to sell the record by retail, or to supply it for the purpose of its being sold by retail by another person, or intends to use it for making other records which are to be so sold or supplied; and

( d) in the case of a record which is sold by retail, the manufacturer pays to the owner of the copyright, in the prescribed manner and at the prescribed time, a royalty of an amount ascertained in accordance with the following provisions of this section.

(2) Subject to the following provisions of this section, the royalty mentioned in paragraph ( d) of the preceding subsection shall be of an amount equal to six and one-quarter per cent. of the ordinary retail selling price of the record, calculated in the prescribed manner:

Provided that, if the amount so calculated includes a fraction of a farthing, that fraction shall be reckoned as one farthing, and if, apart from this proviso, the amount of the royalty would be less than three-farthings, the amount thereof shall be three-farthings."

3

Regulations were made under the Act, of which I think it necessary only to mention Regulation 1 (1) ( f), which provides that the notice required by subsections (1) and (5) of section 8 shall contain the ordinary retail selling price (as thereinafter defined) of the records, or, where it is intended to reproduce the work on more than one type of record, the ordinary retail selling price of each type of record, the manufacturer intends to make and the amount of the royalty payable on each record; and Regulation 3, which provides that the ordinary retail selling price of any record shall be calculated at the marked or catalogued selling price of single records to the public, or, if there is no such marked or catalogued selling price, at the highest price at which single records are ordinarily to be sold to the public exclusive of purchase tax in either case.

4

The Respondents Hardy are manufacturers of records, the Respondents Nestlé are manufacturers of chocolate. The Respondents Hardy make use of a process by which a recording can be produced on a thin film of cellulose acetate at a cost enabling them to sell records at a wholesale price of 4d. each. By this process they have produced film records of the musical work "Rockin' Shoes" and sold them to the Respondents Nestlé mounted upon cards supplied by the latter. A film so mounted is sold by Nestlé to any member of the public who sends to them a postal order for 1s. 6d. with three wrappers from 6d. bars of Nestlé's Milk Chocolate. A typical offer appeared in the "Daily Mirror" of 11th September, 1957, in the words:

"Here's how to get each new stars record. Collect three 6d. wrappers from Nestlé's Milk Chocolate. Fill in the coupon and send it with a Postal Order for l/6d., the price of the record, and your three wrappers. You may order as many records as you like on this coupon, but for each record you must send three wrappers and l/6d. P.O., crossed, payable to the Nestlé Co. Ltd.".

5

Next to the script that I have cited was a coupon containing the names of a number of musical works including "Rockin' Shoes". All this was part of a full page advertisement of Nestlé's Milk Chocolate and no one can doubt that Nestlé's interest in the sale of records was in order to promote the sale of their chocolate, but presumably they were not averse from making such profit as they seem to have made from the sale of records also. The film, as I have said, was mounted on a card supplied by Nestlé, whose name appears prominently upon it. On the back were the words:

"Remember, all you have to do to get each NEW STARS record is to send three wrappers from Nestlé's 6d. Milk Chocolate bars, together with Postal Order for l/6d., and stating which record you want to Nestlé Record Offer, P.O. Box 14, Hayes, Middlesex. Don't forget, 3 wrappers and Postal Order for l/6d."

6

Before, however, making or permitting a public offer such as I have referred to, it was necessary that the notice prescribed by section 8 of the Act should be served. This duty falls on the manufacturer, and accordingly the Respondents Hardy entered into correspondence with the Mechanical Copyright Protection Society Limited, who were, as I assume, acting on behalf of the Appellants. In the first letter which passed between them, dated the 12th September, 1957, but referring to other musical works than "Rockin' Shoes", Hardy stated:

"The retail price of the record, and they are being sold individually, not collectively, is one shilling plus 3 wrappers. Wrappers are valueless and are normally thrown away."

7

In the ensuing correspondence the Society objected that the proposal made by Hardy did not constitute a sale by retail and that therefore the proposed records could not be made under the provisions of section 8 of the Act. Hardy nevertheless on the 17th July, 1957, proceeded in relation to "Rockin' Shoes" to give a notice which purported to be the statutory notice. In it they said:

"The ordinary retail selling price of each record will be not greater than 8 3/4d. exclusive of purchase tax and not greater than 1s. inclusive of purchase tax".

8

By a subsequent letter those figures were amended to 1s. 1 1/2d. and 1s. 6d. respectively. No mention was made of any wrappers. Nestlé then proceeded to put the proposal into effect and sold the record to members of the public who sent a postal order for 1s. 6d. together with three chocolate wrappers. Forthwith the Appellants challenged the validity of their claim to be protected by section 8. Mr. Justice Upjohn supported their contention and granted the appropriate injunction. The Court of Appeal, on the other hand, taking by a majority the...

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