Copyright licensing 01: Navigating the Copyright Tribunal

The Copyright Tribunal of Australia has jurisdiction over certain collective voluntary licensing arrangements. In October 2021, the Tribunal determined that various licences proposed by a collecting society, Copyright Agency Ltd (CAL), were unreasonable, and ordered that two media monitoring organisations, Isentia and Meltwater, be granted the licence terms they were seeking with very limited modification.

CAL applied to the Full Federal Court for judicial review of the Tribunal’s final determination. In Copyright Agency Limited v Isentia Pty Ltd [2022] FCAFC 163, the Full Court dismissed CAL’s application and upheld the Tribunal’s decision.

Both proceedings involved complex issues and provide important lessons for the conduct of future proceedings in this jurisdiction.

In this first of two articles, we describe the key Australian collecting societies and the rights they administer, the role of the Copyright Tribunal in relation to collective voluntary licences, and who can make an application to the Tribunal. We also discuss the critical stages of Isentia’s application to the Copyright Tribunal and the outcome of each. In part two, we will examine the Full Federal Court’s decision in CAL’s application for judicial review and identify some key strategic matters to consider in copyright licence negotiations.

Australian collecting societies and the rights they license

Copyright collecting societies collect copyright fees as a result of licensing arrangements that allow the use of a large number of creative works. The fees are distributed to the relevant copyright holders (such as songwriters, text writers, filmmakers, artists and publishers). The collective administration of rights is a feature of many areas of copyright practice and minimises “transaction costs” for both licensors and licensees. Licences granted by collecting societies are often referred to as “blanket licences”, as they cover all works in the particular collecting society’s repertoire.

The key collecting societies in Australia, and the rights that they licence, are set out in the table below.

 

 

APRA, AMCOS, Copyright Agency and Screenrights are also declared collecting societies for the administration of statutory licensing schemes established under the Copyright Act, such as licensing for educational institutions and government departments.

What is the Copyright Tribunal and what is its role?

The Copyright Tribunal is an independent body established by the Copyright Act 1968 (Cth).

The Tribunal’s jurisdiction has evolved since its establishment but today covers the following main categories:

1. determining the level of royalties or equitable remuneration payable in respect of the statutory licences set out in the Copyright Act;
2. making other orders with respect to the operation of statutory licence schemes, including declaring relevant collecting societies as administrators for the purposes of those schemes;
3. arbitrating disputes in relation to the terms of existing and proposed licence schemes and transactional licences; and
4. dealing with applications for the granting of licences under licence schemes and transactional licences.

This article series will focus on the Tribunal’s powers in relation to (3) and (4) above where a monopoly or quasi-monopoly exists by reason of the collective voluntary licensing arrangements offered by collecting societies. In this context, the Tribunal acts as a constraint on the exercise of market power by collecting societies through its ability to grant licences containing terms and conditions which it considers reasonable.

Who can commence Copyright Tribunal proceedings in relation to collective voluntary licensing arrangements?

Copyright Tribunal proceedings can be brought by either a collecting society or a person requiring a licence from a collecting society.

• Collecting societies: A collecting society can refer an existing or proposed licence scheme to the Tribunal whose task is to either confirm or vary the scheme or substitute it for another scheme proposed by a party, which the Tribunal considers reasonable.
• Licensees: A person who requires a licence from a collecting society may also apply to the Tribunal if:
  • the licensor operates a scheme and has refused or failed to grant the person a licence in accordance with the scheme, or to procure the grant of such a licence;
  • the grant of a licence in accordance with a licence scheme would be subject to the payment of charges, or to conditions that are not reasonable in the circumstances;
  • no licence scheme applies, and the person (or an organisation representing persons requiring a licence) claims that a licensor has refused or failed to grant a licence or to procure the grant of a licence and that in the circumstances it is unreasonable that the licence is not granted; or
  • no licence scheme applies, and the person (or an organisation representing persons requiring a licence) claims that the licensor proposes that the licence should be granted subject to the payment or charges, or to conditions that are unreasonable.

In such cases, if the Tribunal is satisfied that the applicant’s claim is “well-founded”, the Tribunal must either make an order specifying the charges or conditions that the Tribunal considers reasonable in the circumstances, or order that the applicant be granted a licence in the terms proposed by it, the licensor or another party to the application.

How does the Copyright Tribunal approach its task?

The Tribunal’s conventional approach to its quasi-judicial task of determining reasonable licence fees is described in the often cited decision Re Phonographic Performance Company of Australia Ltd under s 154(1) of the Copyright Act 1968 (Cth) [2016] ACopyT 3 (2016) 125 IPR 1:

“First, if a market price is available then that price will be imposed. Secondly, if no direct market price is available, then an attempt will be made to determine what bargain the parties might have reached in a hypothetical negotiation (on a willing but not over anxious basis). Thirdly, if this is not possible then the Tribunal will examine comparable transactions to see whether they can throw any light on price. Finally, if that cannot be done, the Tribunal will engage in a process of judicial estimation which will involve a synthesis of the relevant facts and circumstances into a rate which the Tribunal regards as reasonable or equitable in the circumstances: see as to these four matters, Reference by Phonographic Performance Company of Australia Ltd under s 154(1) of the Copyright Act 1968 (2007) 73 IPR 162.”

In Application by Isentia Pty Limited [2021] ACopyT 2 the Tribunal also stated:

“Fundamentally, the Tribunal by these techniques seeks to benchmark the challenged provisions of the licence in the way described above by reference to at least some of those mechanisms but in the absence of identifiable, relevantly material, benchmarks, the Tribunal seeks to determine the reasonableness or otherwise of the impugned provisions by seeking to understand the methodology by which the licence fee (or other conditions) has (or have) been set, determined or calculated as appears in the licence instrument.”

In most cases the Tribunal will seek to use comparable transactions to establish a base rate which is then adjusted by judicial estimation. That will involve the Tribunal considering other transactions, the particular facts and circumstances of the matter, and, if requested by a party, having regard to the ACCC’s Guidelines to assist the Copyright Tribunal in the determination of copyright remuneration. The Tribunal’s final determination in Isentia’s application was the first decision to apply the ACCC’s Copyright Guidelines since their publication in 2019.

Isentia’s application to the Copyright Tribunal

Isentia is a media monitoring organisation which requires a licence from Copyright Agency to copy and communicate certain print and digital news content for the purpose of providing media monitoring services to its customers.

In 2018, following Copyright Agency’s development of a proposed new industry licence model, Isentia commenced proceedings in the Copyright Tribunal alleging that Copyright Agency’s proposed licence was unreasonable. Isentia also proposed its own licence terms and requested that the Tribunal order that Isentia be granted a licence in the terms proposed by it, or alternatively, orders specifying the terms and conditions that the Tribunal considers reasonable in the circumstances.

The matter was heard concurrently with proceedings commenced by Isentia’s competitor Meltwater, in which Meltwater also alleged that Copyright Agency’s proposed industry licence was unreasonable. A third proceeding was commenced by media monitoring organisation, Streem, but was discontinued before the final hearing.

There were three critical stages of the matter, each of which provides useful insights into the conduct of complex Tribunal matters. Isentia was successful at each stage.

1. Interim licence: Shortly after commencing proceedings, Isentia sought and was granted an interim licence on terms which differed from its existing arrangements with Copyright Agency and which reduced the licence fees payable by Isentia pending the final hearing: Application by Isentia Pty Limited [2018] ACopyT 4. That interim arrangement was granted despite previous decisions to the effect that the Tribunal would extend existing arrangements.
2. Separate questions: Various questions of law arose as to the Tribunal's power to order specific terms. The Tribunal chose to determine these matters as separate questions, prior to the final hearing: see Application by Isentia Pty Limited [2020] ACopyT 2. The most important of these questions was whether the Tribunal had the power to order a term, if it was reasonable, which prohibited Copyright Agency from withdrawing major mastheads from the licence during the period of the licence. This term was very important for Isentia due to the risk that, if the publishers did not like the outcome of the Tribunal proceedings, they would remove those works from CAL’s repertoire, and thereby force the negotiation of direct licences which would not be subject to the Tribunal's jurisdiction. The Tribunal held that it did have the power to order such a term (and, indeed, ordered that term in its final determination).
3. Final determination: The Tribunal delivered its final determination and reasons on 15 October 2021. After considering the substantial lay and expert evidence filed by the parties, the Tribunal found that all of the various licences proposed by Copyright Agency were unreasonable, and Isentia obtained the licence terms it was seeking, with very limited modification.

CAL subsequently applied to the Full Federal Court seeking judicial review of the Tribunal’s final determination. Part two of this series will examine the Full Court’s judgment, what it means for the future of Copyright Tribunal proceedings involving collective voluntary licensing arrangements, and identify key strategic considerations for licensors and licensees to consider in copyright licence negotiations.

Please contact us if you would like any assistance or advice in in relation to your copyright licence arrangements.

Clayton Utz (team led by partner Tim Webb) acted for the lead media monitoring organisation, Isentia, in both the Copyright Tribunal proceedings and the application for judicial review in the Full Federal Court.