ITV Network Ltd v Performing Right Society Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 17 February 2017 |
| Neutral Citation | [2017] EWHC 234 (Ch) |
| Docket Number | Case No: CH-2016-000176 |
| Court | Chancery Division |
| Date | 17 February 2017 |
[2017] EWHC 234 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE COPYRIGHT TRIBUNAL
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mr Justice Mann
Case No: CH-2016-000176
Mr Charles Hollander QC (instructed by Olswang LLP) for the Applicant/Appellant
Mr Robert Howe QC and James Segan (instructed by Simkins LLP) for the Respondents
Hearing date: 16 th January 2017
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an appeal from a determination of the Copyright Tribunal (Chairman HH Judge Hacon) made on a reference under section 126 of the Copyright, Designs and Patents Act 1988, and given on 27th June 2016 ("the Decision"), in which the Tribunal fixed certain terms of a licence or licences given by the respondent collection societies ("the Societies") to various ITV companies who can, for present purposes, be treated as one body and called "ITV". For the purposes of this appeal the important matter that was fixed was the royalties payable by ITV for the use of material produced by members of the Societies and whose copyrights were assigned to, or administered by, the Societies. The period of the licences was the calendar years 2014 to 2017. The base royalty was calculated by starting with an amount agreed under a previous licence in 2009 of £24,071,535, adjusted in various ways to bring it up to date.
It was common ground at the hearing below that the way of arriving at the royalty figure was to take a recently agreed figure and to adjust it to allow for intervening changes in relevant factors, such as viewing figures and inflation (though the actual factors were not agreed). So far as this appeal is concerned the dispute is as to the appropriate previous agreement. ITV relied on an agreement reached in 2012 covering the period 2011 to 2013 ("the 2012 Agreement") as providing the starting point. The Societies relied on one before that, reached in May 2009 and covering the years 2008–2010 ("the 2009 Agreement"), and said that the parties were debarred from relying on the 2012 Agreement as providing a starting point because it was expressly agreed as being "non-precedential" and therefore had to be left out of account. The Tribunal agreed with the Societies on that point, and started with the 2009 Agreement. Whether it thereby committed an error of law is the short point which arises on this appeal. ITV claims that it should have been allowed to rely on the 2012 Agreement notwithstanding the agreement as to its "non-precedential" status and says that the Tribunal was in error in holding otherwise.
On this appeal ITV was represented by Mr Charles Hollander QC. Mr Robert Howe QC led for the Societies.
The jurisdiction for determining the royalties and the techniques in play in this case
The Societies are "licensing bodies" for the purpose of the 1988 Act and the jurisdiction of the Tribunal arises under section 126, which provides for the Tribunal to adjudicate on whether an expiring licence should be renewed, and if so what its terms should be.
"126 Reference to tribunal of expiring licence.
(1) A licensee under a licence which is due to expire, by effluxion of time or as a result of notice given by the licensing body, may apply to the Copyright Tribunal on the ground that it is unreasonable in the circumstances that the licence should cease to be in force.
(2) Such an application may not be made until the last three months before the licence is due to expire.
(3) A licence in respect of which a reference has been made to the Tribunal shall remain in operation until proceedings on the reference are concluded.
(4) If the Tribunal finds the application well-founded, it shall make an order declaring that the licensee shall continue to be entitled to the benefit of the licence on such terms as the Tribunal may determine to be reasonable in the circumstances.
(5) An order of the Tribunal under this section may be made so as to be in force indefinitely or for such period as the Tribunal may determine."
There is limited statutory guidance as to how the Tribunal should go about its task of determining the terms under subsection (4):
"129 General considerations: unreasonable discrimination.
In determining what is reasonable on a reference or application under this Chapter relating to a licensing scheme or licence, the Copyright Tribunal shall have regard to –
(a) the availability of other schemes, or the granting of other licences, to other persons in similar circumstances, and
(b) the terms of those schemes or licences,
and shall exercise its powers so as to secure that there is no unreasonable discrimination between licensees, or prospective licensees, under the scheme or licence to which the reference or application relates and licensees under other schemes operated by, or other licences granted by, the same person.
135 Mention of specific matters not to exclude other relevant considerations.
The mention in sections 129 to 134 of specific matters to which the Copyright Tribunal is to have regard in certain classes of case does not affect the Tribunal's general obligation in any case to have regard to all relevant considerations."
A large number of factors are capable of coming into play in the determination of the Tribunal, and in the decision appealed from a number of them are identified. So far as royalties are concerned, the Tribunal recognised the importance of a previous decision of the Tribunal in British Sky Broadcasting Ltd v The Performing Right Society Ltd [1998] EMLR 193. Drawing on that case the Tribunal observed (in paragraph 14(5)) that the royalty figures in previous licences agreed between the parties, and negotiated at arm's length, concerning the same rights and taking place in the same marketplace, were relevant, though changes in circumstances had to be borne in mind. It went on to list a number of other factors which should, and should not, be taken into account.
In paragraph 15 the Tribunal referred to the importance of a previous licence as a starting point, which is the matter lying at the heart of this appeal.
"An existing tariff freely negotiated between the parties to a reference is likely to provide a particularly helpful starting point (and possibly a finishing point if, as ITV argued in the present case, there have been no relevant changes in the interim)."
And at paragraph 16 the Tribunal acknowledged that the parties in the present dispute agreed with that stance (as indeed they do on this appeal).
"16 … In the present case it was common ground first, that willing licensor/willing licensee was the correct test and secondly, that in applying it the best starting point was the royalty found in the most recent relevant licence between the parties."
Which previous licence? — the history of previous licences in this matter and the Decision
The dispute before the Tribunal which gives rise to this appeal is: Which previous licence should be taken as a starting point? As outlined above, there were two previous licences which were candidates. The Tribunal summarised the licences in a manner which was not disputed, and that summary is as follows.
By the 2009 Agreement the parties agreed a licence fee for the period 2008–10 in the sum of £70m for the period, which amounted to £23.3m per year. The other terms of the licence mainly repeated the terms of a preceding licence. That term had been agreed in 2008, but by the time the agreement was actually signed in 2009 the economic downturn had begun and the parties re-considered the appropriate licence fee. The result was a side letter of 7th May 2009 ("the Side Letter") which had the effect of retaining the licence fee at £70m but afforded ITV the opportunity of a discount, with a clawback if the net advertising revenue of ITV reached a certain level (the details of which do not matter). What is of significance to this appeal is the expressed basis of the letter:
"In light of the current economic downturn and the decrease in ITV's television advertising revenues, the Licensors have agreed, subject to the terms and conditions set out below, to grant ITV (i) a discount on the Licence Fees agreed under the Extension Agreement for the periods 1 April 2009 to 31 December 2009 and 1 January 2010 to 31 December 2010 and, (ii) alternative payment terms to those set out in the Extension Agreement. The Licensors have agreed to the foregoing terms and conditions on a strictly non precedential basis and such agreement shall not commit the Licensors to agree similar terms in future agreements or licences between the parties."
The emphasis is mine. The words emphasised have a particular relevance to the Decision and to this appeal. The Tribunal acknowledged the significance of this letter in paragraph 24 of the Decision:
"24. Two matters emerge from the side letter. First, in free commercial negotiations the parties apparently recognised that it was appropriate to make some adjustment to the royalty according to ITV's ability to pay. Secondly, the parties were conscious that any reduction in royalty agreed had the potential to affect the royalties agreed or imposed by this Tribunal in subsequent years. They took pains to ensure that the reduction would have no such effect. It was not in dispute that were the Extension Agreement of 2009 to serve as a starting point for the determination of the royalty in the present proceedings, the discount provided for in the side letter should be ignored."
Mr Hollander agrees that the last sentence of that paragraph...
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