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Court of Appeal of New Zealand |
Last Updated: 31 January 2018
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IN THE COURT OF APPEAL OF NEW ZEALAND
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BETWEEN
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Appellant |
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AND
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Respondents |
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Hearing: |
12 February 2015 |
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Court: |
Randerson, White and Miller JJ |
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Counsel: |
A H Brown QC and JRE Wach for Appellant
R J Katz QC for Respondents |
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Judgment: |
JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by Miller J)
TABLE OF CONTENTS
[1]
[9]
[24]
[29]
[35]
[39]
[42]
[47]
[52]
[60]
[74]
[1] The Copyright Act 1994 distinguishes for regulatory purposes between licensing schemes and licences offered otherwise than under such schemes. It defines a licensing scheme as a scheme setting out the “classes of cases” in which the scheme’s operator is willing to grant copyright licences and the terms of those licences.[1] The question of construction before us is whether a scheme may comprise a single class of licence, to be offered on the same terms to all eligible licensees, or must comprise more than one class each offering different terms.
[2] Copyright Licensing Ltd (CLL) is a copyright collective which acts as a licensing body for New Zealand authors and publishers of books, journals, newspapers and magazines. It also represents overseas owners under reciprocal agreements with reprographic rights organisations in other jurisdictions. Among other things, it licenses for use in student course materials the reprographic copying (that is, by photocopying or scanning) and digital distribution of extracts from material held in hard copy format.
[3] The respondents are the eight New Zealand universities. Over many years they have collectively negotiated licences with CLL under which each university paid the same fee per equivalent fulltime student (EFTS) in exchange for the right to copy works for course materials. All involved have treated this arrangement as a licensing scheme.
[4] In 2012 CLL wanted to increase the fee from $20 to $26 per EFTS with an annual CPI adjustment. The universities found that unacceptable. They pointed to declining demand, the result of digital media supplanting photocopied materials. Before us, Mr Katz QC explained that the universities’ complaint is that the scheme requires the universities to cross-subsidise one another; that is so because each pays the same per student fee but the amount of copying they do varies.[2]
[5] Negotiations having reached an impasse, CLL forced the issue by filing a reference in the Copyright Tribunal under s 149(1) of the Act, seeking to have its proposed scheme declared reasonable and approved accordingly.
[6] The universities responded with an interlocutory application seeking a declaration that what CLL proposes is not a licensing scheme but rather a licence or set of licences. If that were correct, the licences could not be approved collectively under s 149: should it seek approval, CLL would have to apply under s 157, under which the Tribunal considers the terms of individual licences. The universities were motivated by concern about limits upon the Tribunal’s power to vary a scheme under s 149. They point to this Court’s decision in Audio-Visual Copyright Society Ltd v University of Auckland (“AVCOS”), in which it was said that when addressing a scheme the Tribunal cannot “deal with the terms of individual licences.”[3]
[7] The Tribunal dismissed the universities’ application, holding that what CLL had proposed was a scheme for the purposes of the Act.[4] The decision was reversed on appeal, Fogarty J holding that a scheme must contain more than one class of cases.[5]
[8] CLL now brings this further appeal.[6] It is supported by an intervener, Recorded Music Ltd, which is a collective offering single-class licensing schemes. The universities have brought a cross-appeal in which we are asked to determine whether AVCOS correctly states the law.
[9] Copyright is a property right attaching to, among other things, literary, dramatic, musical and artistic works.[7] The Act confers upon a work’s owner the exclusive right to do certain things – notably, copying – in relation to the work.[8]
[10] Creative works may be enjoyed by many users, in one way or another, without diminishing them,[9] and they are susceptible to unauthorised copying. For these reasons, owners need effective licensing mechanisms if they are to take advantage of the monopoly that the law confers upon them. However, licensing confronts high transactions costs, meaning the costs of finding potential licensees, negotiating terms, recovering payment and policing compliance with licence terms. Transactions costs may preclude exploitation entirely, particularly where the work has a low value to individual licensees.
[11] Copyright collectives developed to overcome these problems. They play an important role, particularly in markets for mass secondary use of copyrighted material, of which reprographic copying of published material held in libraries is a good example.[10] Collectives take advantage of scale economies in copyright administration, allowing owners to license their rights efficiently and offering users ready access to copyright works. They do so, notably, by licensing an entire catalogue of works at a uniform price, so avoiding the costs of negotiating content and price on a licensee-by-licensee basis.
[12] Licensing bodies – meaning an owner or owner’s agent, such as a collective[11] – may choose to set standard terms on which they are willing to grant licences to a class of user. The Act recognises this practice by providing for copyright schemes. It also provides for licences offered otherwise than pursuant to a scheme. So, for example, CLL could have chosen to negotiate licences separately with each university.
[13] Markets for copyright administration may exhibit natural monopoly characteristics, the result of high transactions costs and scale economies.[12] This phenomenon encourages large collectives, which may acquire significant market power vis-à-vis both owners and users. Market power can be exploited not only by setting high prices but also by refusing unreasonably to discriminate among licensees on price or content.[13] Some licensees may respond by organising themselves into a collective and insisting upon bilateral negotiations, as the universities have done in New Zealand.[14]
[14] The Act recognises that the monopoly conferred upon licensing bodies may be misused. It seeks to prevent misuse and balance the interests of owners and licensees by conferring jurisdiction upon the Tribunal to vary, where it is reasonable in the circumstances to do so, the terms of a scheme, or licence, that a licensing body has chosen to offer.
[15] The Act regulates licensing schemes in sections 148 – 155. It defines a licensing scheme as follows:
2 Interpretation
(1) In this Act, unless the context otherwise requires,—
licensing scheme means a scheme setting out—
(a) the classes of cases in which the operator of the scheme, or the person on whose behalf the operator acts, is willing to grant copyright licences; and
(b) the terms on which copyright licences would be granted in those classes of cases;—
and for the purpose of this definition a scheme includes anything in the nature of a scheme, whether described as a scheme or as a tariff or by any other name.
[16] Section 148 catalogues those licensing schemes to which the Tribunal’s powers under s 149 apply:
148 Licensing schemes to which sections 149 to 155 apply
Sections 149 to 155 apply to—
(a) licensing schemes that—
(i) are operated by licensing bodies; and
(ii) relate to copyright in literary, dramatic, musical, or artistic works, or films, or film soundtracks when accompanying a film; and
(iii) cover works of more than 1 author; and
(iv) relate to licences for copying the work or performing, showing, or playing the work in public or communicating the work to the public:
(b) all licensing schemes in relation to copyright in sound recordings (other than film soundtracks when accompanying a film), communication works, or the typographical arrangement of published editions:
(c) all licensing schemes that—
(i) relate to copyright in computer programs, sound recordings, or films; and
(ii) relate to licences for the rental of copies of works of those descriptions to the public:
(d) all licensing schemes that authorise—
(i) copying of literary, dramatic, musical, or artistic works or the typographical arrangements of published editions by or on behalf of educational establishments; or
(ii) copying in the circumstances set out in section 45(4); or
(iii) recording in the circumstances set out in sections 48(1) and 91(2);—
(iv) [Repealed]
and in those sections the term licensing scheme means a licensing scheme of any of those descriptions.
It is common ground that a scheme providing for the copying of course materials is captured under s 148(d). The question is whether CLL’s proposal is a scheme at all.
[17] Section 149(1) provides that the operator of a proposed scheme or any organisation claiming to represent prospective licensees may refer the proposed scheme to the Tribunal:
149 Reference of proposed licensing scheme to Tribunal
(1) The terms of a licensing scheme that—
(a) is proposed to be operated by a licensing body; and
(b) is proposed to apply generally or in relation to any description of cases—
may be referred to the Tribunal by—
(c) the operator of the proposed scheme; or
(d) an organisation claiming to be representative of persons claiming that they require licences in cases of a description to which the scheme would apply.
[18] The Tribunal may decline to entertain the reference on the ground that it is premature. If it decides to entertain the reference it may make such order, either confirming or varying the proposed scheme, as it thinks reasonable in the circumstances:
(2) The Tribunal shall first decide whether to entertain the reference and may decline to do so on the ground that the reference is premature.
(3) If the Tribunal decides to entertain the reference, it shall consider the matter referred and make such order, either confirming or varying the proposed scheme, either generally or so far as it relates to cases of the description to which the reference relates, as the Tribunal may determine to be reasonable in the circumstances.
[19] A scheme may be referred to the Tribunal while it is in operation, by the operator or a person claiming to require a licence or by an organisation claiming to represent such persons.[15] In that case the Tribunal may under s 150 make such order, either confirming or varying the scheme “so far as it relates to cases of the description to which the scheme relates”, as it thinks reasonable in the circumstances.
[20] In a case to which a licensing scheme applies, a person who claims that the licensing body has refused to grant a licence, or failed to do so within a reasonable time, may apply to the Tribunal for a licence. Such application may also be made in a case excluded from a licensing scheme, but only where the case is so similar to those in which licences are granted under the scheme that it would be unreasonable to refuse one. The Tribunal may declare that the applicant is entitled to a licence on such terms as it thinks are applicable to the scheme or, as the case may be, reasonable in the circumstances:
- Application for grant of licence in connection with licensing scheme
(1) A person who claims, in a case covered by a licensing scheme, that the operator of the scheme has refused to grant to that person or procure the grant to that person of a licence in accordance with the scheme, or has failed to do so within a reasonable time after being asked, may apply to the Tribunal for a licence.
(2) A person who claims, in a case excluded from a licensing scheme,—
(a) that the operator of the scheme has refused to grant to that person or procure the grant to that person of a licence, or has failed to do so within a reasonable time of being asked, and that in the circumstances it is unreasonable that a licence should not be granted; or
(b) that the operator of the scheme proposes terms for a licence that are unreasonable—
may apply to the Tribunal.
(3) A case shall be regarded as excluded from a licensing scheme for the purposes of subsection (2) if—
(a) the scheme provides for the grant of licences subject to terms excepting matters from the licence and the case falls within such an exception; or
(b) the case is so similar to those in which licences are granted under the scheme that it is unreasonable that it should not be dealt with in the same way.
(4) If the Tribunal is satisfied that the claim is well-founded, it shall make an order declaring that, in respect of the matters specified in the order, the applicant is entitled to a licence on such terms as the Tribunal may determine to be applicable in accordance with the scheme or, as the case may be, to be reasonable in the circumstances.
(5) The order may be made so as to be in force indefinitely or for such period as the Tribunal may determine.
[21] A separate set of provisions governs licences granted otherwise than under a licensing scheme. Section 156 identifies those licences to which the Tribunal’s powers apply. Section 157 establishes the Tribunal’s powers:
157 Reference to Tribunal of proposed licence
(1) The terms on which a licensing body proposes to grant a licence may be referred to the Tribunal by the licensing body or the prospective licensee.
(2) The Tribunal shall first decide whether to entertain the reference, and may decline to do so on the ground that the reference is premature.
(3) If the Tribunal decides to entertain the reference, it shall consider the terms of the proposed licence and make such order, either confirming or varying the terms, as it may determine to be reasonable in the circumstances.
(4) The order may be made so as to be in force indefinitely or for such period as the Tribunal may determine.
[22] The Act identifies considerations to be taken into account in certain classes of cases. These apply as appropriate to both licensing schemes and licences granted otherwise than under a scheme. Notably, s 161 provides that the Tribunal must exercise its powers to prevent unreasonable discrimination among licensees:
161 Unreasonable discrimination
In determining what is reasonable on a reference or application under this Part relating to a licensing scheme or licence, the 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 ensure 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.
[23] And s 162, which deals specifically with reprographic copying, provides that the Tribunal must have regard to certain considerations:
162 Licences for reprographic copying
Where a reference or application is made under this Part relating to the licensing of reprographic copying of published literary, dramatic, musical, or artistic works, or the typographical arrangements of published editions, the Tribunal shall have regard to—
(a) the extent to which published editions of the works in question are otherwise available; and
(b) the proportion of the work to be copied; and
(c) the nature of the use to which the copies are likely to be put.
[24] CLL has granted licences to the universities since 1994. The licences have been negotiated on a collective basis between CLL and a negotiating team appointed by the New Zealand Vice-Chancellors’ Committee, as it was formerly known. Both sides have always agreed that the terms of the resulting licences would apply to all universities.
[25] The same procedure was adopted in 2012, when CLL commenced negotiations for the licences to issue from 1 March 2013. We need not review the negotiations here, since much of the evidence is concerned with a now-abandoned claim that CLL’s reference to the Tribunal, on 28 February 2013, was premature. The reference recited that CLL intended to establish a new licensing scheme under which universities might secure non-exclusive licences to copy the copyright works for authorised educational purposes. The reference attached a standard licence to be offered pursuant to the licensing scheme.
[26] The proposed licence recites that:
This Agreement is one of a number of identical agreements made between CLL and each of the Specified Universities pursuant to a licensing scheme for all New Zealand universities.
[27] The proposed licence would extend to all copyright works published in hard copy format, subject to a limited number of exceptions. It would make the same content available without distinction to all licensees, and it would provide for an annual fee per EFTS, so that the price payable per student would be the same for all licensees. The proposed fee is $26 per EFTS, increasing thereafter at the start of each year at the rate of CPI.
[28] The universities responded collectively to the reference, moving for a declaration that the document referred is not a licensing scheme for purposes of
ss 149 – 150 of the Act. They complained that the proposed scheme fails to set out the classes of cases in which CLL is willing to grant licences, the terms on which licences will be granted in each such class, and the persons to whom the scheme relates. They also contended, as noted earlier, that the reference was premature, alleging that CLL had failed to negotiate sufficiently and in good faith, and urged that the parties should be required to continue negotiations.
[29] The universities’ application was decided by the Deputy Chair of the Tribunal, Mr Warwick Smith (as he then was). We need not review the decision in detail because much of it is no longer in dispute. With respect to the issue that concerns us, he recorded the universities’ submission that the Tribunal’s jurisdiction to vary a proposed licensing scheme under s 149 is narrower than its jurisdiction to vary a proposed licence under s 157.[16] He responded as follows:[17]
[105] It seems to me that there are a number of points to be made in respect of that submission. First, I am not sure that the Respondents’ concerns are necessarily justified in this case, where there are only eight members of the nominated “class”, all of which have been named as Respondents in the Reference. Secondly, whether the Reference is a reference of a proposed scheme under s 149 or a proposed licence under s 157, the Tribunal’s jurisdiction will be limited to “confirming or varying” what has been referred. It seems to me that the reason for the use of the “confirm or vary” formula in both s 149 and s 157 is probably that Parliament was simply recognising that the Tribunal has no jurisdiction under either section unless and until something has been proposed by the licensing body, and that neither section compels licensing bodies to make proposals. In those circumstances, it is wholly understandable that the Tribunal’s power should have been limited, under both sections, to varying the licensing body’s proposal, and not substituting for it something quite different. Indeed, the Trust Power[[18]] and AVCOS cases make it clear that the principal reason the Tribunal cannot “rewrite” a proposed licensing scheme under s 149, or substitute for the proposed scheme a scheme which is quite different, is that to do so would be to go beyond the statutory jurisdiction to “vary” the licensing scheme. I cannot see why that reasoning should not apply equally to the identical (“confirm or vary”) wording in s 157(3) of the Act.
[106] Thirdly, there is nothing in the AVCOS case which would prevent the Tribunal from considering individual terms within a standard form of licence which has been put forward as part of a proposed licensing scheme. Certainly care would have to be taken in dealing with a proposed licensing scheme to ensure that excessive weight was not placed upon the particular impact of the scheme or a part thereof upon a particular prospective licensee, and in considering whether or not a variation should be made to accommodate some of the particular needs of a particular licensee or licensees: any variation or modification must not unduly impact upon the concept of the overall reasonableness of the scheme in terms of the generality of licensees. However, in this case the “class” for which CLL contends does appear to be a homogeneous group, and Mr Wills stated in his affidavit that it has at all times been the consistent position of the eight universities that they would negotiate and settle terms applicable to all of them, as if one.
[107] A fourth factor in this case is that CLL has itself put in issue in its Statement of Case all of the amended licence provisions which were known by it to be contentious, and the Respondents have addressed each of those issues in their Reply.
[30] In the circumstances, the Deputy Chair concluded, any differences in the extent of the Tribunal’s powers over a scheme or a proposed licence might turn out to be more apparent than real. However, he did not need to decide that point.
[31] The Deputy Chair held that a licensing scheme is something in the nature of a standing invitation to treat, a unilateral act of the licensing body, for which the acceptance or agreement of prospective licensees is unnecessary.[19] He rejected the universities’ submission that a scheme must contain more than one class of case, reasoning, by reference to s 33 of the Interpretation Act 1999, that the plural used in the definition of licensing scheme includes the singular. Nothing in the authorities precluded that interpretation. Nor did s 151; phrases such as “cases of that description” are neutral so far as the question of how many cases might be contained within a given scheme is concerned.
[32] The Deputy Chair observed that if the universities were correct, licensing bodies would be unable to use schemes in some circumstances to which they are manifestly suited. He gave the example of several hundred prospective licensees, all running the same kind of business, who require the same kind of licence for the same repertoire of copyright works.[20]
[33] The Deputy Chair also rejected the universities’ submission that a licensing scheme must identify “standard terms” and the terms offered by CLL could not be considered “standard”.[21] He reasoned that the requirement that licensing terms in the scheme must be standard means no more than that “the same terms must be available to all users requiring licences in the same class of case.”[22]
[34] The Deputy Chair found on the facts that the documents constituting the reference sufficiently established that CLL was making a standing offer that any of the universities might accept unilaterally, taking up a licence in the form proposed and so obtaining the protection conferred by the licence. He concluded accordingly that the reference is a licensing scheme for purposes of the Act.
[35] After summarising the background, Fogarty J recorded the universities’ concern with the proposed scheme. He was given to understand that the universities want to negotiate separate per-university fees and fear that this Court’s judgment in AVCOS precludes such negotiations. He recorded that counsel for CLL did not accept that the Tribunal’s powers over a licensing scheme under s 149(1) preclude different prices and endorsed the Tribunal’s observation that any differences in the extent of its powers might turn out to be more apparent than real.[23]
[36] The Judge noted that the proposed scheme has only one class and the terms of the licence will be the same for all members falling within that class. He observed that CLL might have referred the document to the Tribunal as a proposed licence applicable to each university, pursuant to s 157(1). That would clearly allow the Tribunal to entertain different prices for different universities.[24]
[37] Turning to the question of construction, the Judge reasoned that a class exists as a consequence of differentiation or division, meaning that there will be at least two classes in any scheme. Differentiation being the whole point, the terms applicable to each class must differ. For these reasons, it is inappropriate to interpret the plural “classes” so that it might refer to a single class, s 33 of the Interpretation Act notwithstanding. To do so would be to contradict the requirement of a scheme or plan, the purpose of which is to distinguish at least two classes within the whole set of proposed licences.[25]
[38] The Judge accordingly concluded that what CLL had referred to the Tribunal was not a scheme. Rather, it amounted to terms upon which CLL proposed to grant individual licences to each university. It was, accordingly, a reference under
s 157(1).[26] The appeal was allowed accordingly.
[39] CLL maintains that the reference was a licensing scheme. A scheme may license activities on standard terms to any person who wishes to take up a licence. The definition of “licensing scheme” requires nothing more than that. It would be unworkable and costly to negotiate individual licences on potentially divergent terms where a single class of “licensable activity” comprises many prospective licensees.
[40] The universities submit that on its true construction the definition requires two or more classes. Fogarty J correctly decided that a scheme must normally comprise a set of criteria defining the division of licences into classes and setting out the terms of the licences to be granted in each class. What CLL has referred is nothing more than a licence, which it could have referred under s 157. The legislation and the reference should be interpreted with the objective of mitigating the harsh economic effects of CLL’s monopoly.
[41] In their cross-appeal the universities characterise as dicta, and challenge as wrong, statements in AVCOS to the effect that the Tribunal has no jurisdiction under ss 149–150 of the Act to deal with the terms of individual licences. They say that when a scheme is referred the Tribunal may consider the terms of individual licences granted under it. CLL responds that s 149(3) confers upon the Tribunal a wide discretion, but it may not alter the terms of individual licences within a class, for that would be inconsistent with the nature and purpose of a scheme: that being so, AVCOS was not wrong.
[42] Recorded Music New Zealand Ltd sought to intervene in this Court. The universities having opposed, Recorded Music was allowed to file submissions and a supporting affidavit on the basis that its application would be determined with the appeal. Counsel, Mr Chisholm QC, did not appear at the hearing.
[43] The affidavit was sworn by Damian Vaughan, the Chief Executive of Recorded Music. The gist of Mr Vaughan’s affidavit is that Recorded Music, which licenses the public performance of sound recordings, operates a number of
single-class licensing schemes.
[44] The universities submitted that the Court’s power to intervene should be exercised only in special situations and contended that there is nothing special about the present case. Mr Katz pointed out that had Recorded Music sought to join the proceeding in the Tribunal it would be required to show that it had a “substantial interest” in the matter in dispute.[27] He observed that Recorded Music made no attempt to intervene before the Tribunal or in the High Court, and submitted that by intervening at this late stage it afforded the universities no opportunity to respond to Mr Vaughan’s evidence.
[45] We observe that the universities did file an affidavit in reply to that of Mr Vaughan. The deponent, Melanie Johnson, legal counsel to the University of Auckland, seeks to distinguish the single-class licensing schemes operated by Recorded Music but does not dispute that such schemes are commonplace.
[46] Rule 48 of the Court of Appeal (Civil) Rules 2005 allows for intervention in appeals. The Court exercises this power with restraint.[28] It may grant leave if it would be assisted by submissions in a case of general principle and wide importance. It will take into account any relevant expertise or unique position of the intervener and the impact of the intervention upon the appeal. We are satisfied that Recorded Music has a substantial interest in the issue, its perspective assists us, and its intervention did not impose unduly upon the parties. Leave is granted accordingly.
[47] Shortly before the hearing Mr Katz advised the Court that the reference to the Tribunal had been discontinued, the parties having settled the price and terms of the standard licence.
[48] The settlement followed extended negotiations, but it did not extend to this appeal or the cross-appeal. The parties agree that the proper classification of the form of licence under the Act remains a discrete issue of law on which the parties differ. They say that the issue will recur.
[49] Mr Katz advised the Court that the universities were content for the Court to decline to hear the appeal. For CLL, Mr Brown QC urged the Court to continue to hear it, noting that CLL insisted during negotiations on continuing because of the implications of the High Court judgment for other licensing schemes.
[50] We were satisfied that, although the issue is moot so far as the particular reference to the Tribunal was concerned, it possesses public importance and it is likely to lead again to litigation, possibly between the same parties.[29] There is something incongruous about the universities collectively seeking separate pricing on the ground that they are cross-subsidising one another. It seems clear, nonetheless, that the issue complicates recurring negotiations in their long-running relationship with CLL. Further, all submissions had been filed before the settlement was evidently concluded, so no question arose of deciding the issue in the absence of a contradictor.
[51] In a telephone conference held on 2 February 2014 we accordingly indicated that the appeal should proceed. Mr Katz very properly advised that he would appear, on a pro bono basis if necessary.
[52] A “licensing scheme” is relevantly a “scheme” setting out the “classes of cases” in which the operator is willing to grant licences and the terms of those licences, and it includes “anything in the nature of a scheme”, whether described as such or not. Several points may be made at once about this definition. First, it is incomplete; “scheme” is not further defined, so one must look for guidance to the Act’s purposes and the authorities. Second, it presumes that the choice of classes of cases in which licences will be offered is that of the operator, at least initially. Third, it emphasises substance over form, so conferring on the Tribunal, in conjunction with ss 148–149, the power to decide whether something is a scheme for regulatory purposes. The definition’s breadth presumably reflects legislative concern that the Tribunal should enjoy jurisdiction over anything in the nature of a scheme: we observe that, a scheme having come into operation, anyone requiring a licence may refer it to the Tribunal under s 150 or apply to the Tribunal for a licence under s 153.
[53] The Interpretation Act 1999 provides that words in the singular include the plural and words in the plural include the singular.[30] In the ordinary way, then, the definition would be interpreted as permissive, meaning that the definition admits, but is not confined to, schemes comprising more than one class. Only if the context and the legislative purpose require it must “classes” exclude the singular.[31]
[54] Mr Katz argued that because classes divide, a scheme must have more than one. We accept that “class” distinguishes one group from another; a class is generally defined as a group of persons or things possessing common attributes that distinguish them from others not of that class.[32] For the Tribunal’s regulatory purposes a class may identify any combination of copyright works, licensable activities and prospective licensees contemplated by s 148. But it need not follow that a scheme must possess more than one class.[33] All that is necessary to distinguish the class is that there should exist another class of persons who will not be offered licences on the same terms. That other class may comprise people excluded from the scheme altogether.
[55] As the Deputy Chair observed, a licensing body might find it efficient to offer a scheme comprising a single class where there exists a substantial number of prospective licensees all requiring access to the same repertoire on the same terms.[34] The evidence of Mr Vaughan confirms, unsurprisingly, that such schemes exist, as does an affidavit of Paula Browning, CLL’s chief executive. Recorded Music’s single-class schemes distinguish among music dubbing, music compilation and music broadcasting, with their associated licensees. It is noteworthy that in a very similar case to this one, Universities UK Ltd v Copyright Licensing Agency Ltd, the UK Copyright Tribunal recorded that it was common ground that the arrangement between a copyright collective and higher education institutions was a scheme.[35]
[56] Mr Katz also argued that what CLL referred was not a scheme but merely a licence. He invited us to focus on the terms of the licence, pointing out that it contains nothing, apart from the recital quoted at [26] above, to show that it forms part of a scheme. We reject this submission. The authorities establish that a scheme is a standing offer the terms of which are formulated by the licensing body and extended to a class of persons, any of whom may accept the offer and take up a licence without further negotiation.[36] So, for example, in the Universities UK case the Copyright Tribunal held that a licence offered to higher education institutions for student course packs was not a licensing scheme as defined, because licensees had to seek further permission and a quoted price.[37] It is a scheme’s quality as a standing offer on standard terms that distinguishes it from a series of individually negotiated licences. Consistent with the substantive nature of the definition, under which a licensing scheme includes anything in the nature of one, the Act does not prescribe that a scheme must take any particular form.[38] A scheme’s terms may emerge, as in this case, from antecedent negotiations or from correspondence accompanying the proposed licence.[39] It is not in dispute that CLL offered the same licence on the same terms to all eight universities as a group.
[57] Mr Katz observed that CLL could easily negotiate eight separate licences with the universities. No doubt it could. But he did not suggest that the legislation precludes a scheme with so few licensees. As a general proposition, and subject to the Tribunal’s oversight, the Act allows a licensing body to decide whether and upon what terms it will offer licences.[40]
[58] Turning to the last of Mr Katz’s points, we accept that the Tribunal’s powers are designed to check misuse of market power, but we do not think that objective requires a different construction of “licensing schemes”. A requirement that any scheme offered by a licensing body must have more than one class does little if anything in itself to curb market power, since the licensing body defines, unless the Tribunal should intervene, which licensees and licensable activities fall into each class; further, as Mr Brown pointed out, such requirement could easily become something of an exercise in form over substance. And for reasons discussed below, it is not correct to say that the Tribunal’s powers are confined to an entire scheme or even to any single class of case identified by the licensing body; rather, the Tribunal may vary a scheme as it affects cases of any description to which the scheme would apply.
[59] We conclude that the Deputy Chair was correct; a scheme may contain a single class, and what CLL referred to the Tribunal was a proposed licensing scheme. The appeal must be allowed accordingly.
[60] The question in AVCOS was whether a licensing scheme was “in operation” so as to found jurisdiction for the Tribunal under s 150 of the Act. This Court held that a licensing body need not refer a scheme under s 149 as a preliminary to a reference under s 150, and a scheme was “in operation” from the moment of its commencement, which was usually the date on which the licensing body stipulated that it was available. Any other construction could put an individual licensee at a disadvantage. The Court went on to discuss briefly the Tribunal’s powers, holding:
[29] The powers of the tribunal under both ss 149 and 150 relate to confirming or varying the licensing scheme. There is no jurisdiction for the tribunal under those sections to deal with the terms of individual licences. The scheme must be approved as a whole or varied in such manner as the tribunal determines to be reasonable in the circumstances. The tribunal is also required, in determining what is reasonable, to have regard to the availability of other schemes or licences and their terms and is obliged to exercise its powers to ensure there is no unreasonable discrimination between licensees or prospective licensees (s 161).
[30] It follows from these provisions that the licensing scheme must be one in which licences will be available on the same terms to persons requiring licences in a case to which the scheme would apply... .
[61] Before us, Mr Katz argued that the passages just quoted are obiter dicta, emphasised that there was no contradictor, and invited us distinguish AVCOS on the ground that it did not involve a single class licensing scheme. So far as the first two points are concerned, we will address the merits.[41] The third point, that AVCOS did not involve a single class, is misconceived. The scheme covered all tertiary institutions as a class. We do not accept that it comprised different classes merely because one might distinguish universities from other tertiary institutions; as we have just noted, the licensing body defines the scheme and its classes, subject to variation by the Tribunal under s 149 or s 150.
[62] Mr Katz also contended that AVCOS was wrong insofar as the Court held that the power to confirm or vary under s 149(3) does not extend to the terms of individual licences. That is the central question on the cross-appeal.
[63] Mr Katz argued that if AVCOS is correct, no single university will be able to challenge the fee that it must pay under the scheme proposed by CLL. Put another way, AVCOS establishes that the Tribunal may not vary terms on a
licensee-by-licensee basis. Mr Brown agreed, submitting that the Tribunal’s power under s 149(3), although extensive, does not extend to the terms of individual licences under a scheme.
[64] As Mr Brown submitted, we lack an established factual context and should exercise caution accordingly. This is not the occasion on which to draw the outer bounds of the Tribunal’s jurisdiction under s 149. But it is necessary to decide whether AVCOS was correct, and that in turn requires that we make some general points about the Tribunal’s jurisdiction.
[65] We have quoted the relevant parts of s 149 at [17] and [18] above. The section applies to a licensing scheme that is proposed to be operated by a licensing body and is to apply “generally or in relation to any description of cases”. The terms of the scheme may be referred to the Tribunal by its operator or by any organisation claiming to be representative of persons claiming that they require licences in “cases of a description” to which the scheme would apply. The Tribunal may confirm or vary the proposed scheme, either generally or so far as it relates to “cases of the description to which the reference relates”.
[66] We make three points, as a matter of construction. First, an applicant who is not the scheme’s operator must be an organisation claiming to be representative of persons claiming that they need licences. A person who simply wants a licence for himself or herself may not refer a proposed scheme under s 149, although he or she may refer the scheme under s 150, or apply for a licence under s 153, once the scheme is in operation. We observe that where a scheme has been referred under s 149, the Tribunal will not without first granting special leave entertain a second reference under ss 149 or 150 before 12 months have elapsed from its order on the first reference.[42]
[67] Second, s 149 contemplates that the scheme may be referred to the Tribunal insofar as it affects cases of any description to which the scheme would apply. In Universities UK Ltd the UK Copyright Tribunal held that the phrase “a case of a description” is wider than “classes” and allows the Tribunal to extend a scheme beyond the classes nominated by the licensing body.[43] We add that it also allows the Tribunal to vary a scheme so far as it affects cases of a description falling within a class nominated by the licensing body. So, for example, some of the universities requiring licences might have referred CLL’s proposed scheme through an organisation, inviting the Tribunal to vary it so far as it relates to cases of a description applicable to them.
[68] Third, the Tribunal may vary a scheme as it thinks reasonable in the circumstances. Having decided to entertain the reference, the Tribunal must make such order “either confirming or varying the proposed scheme, either generally or so far as it relates to cases of the description to which the reference relates, as the Tribunal may determine to be reasonable in the circumstances.”
[69] The power to confirm or vary a scheme is to be exercised for the dual statutory objectives of facilitating access to copyright works and curbing any misuse of market power. Speaking of the corresponding provision in the Copyright Act 1968 (Cth), the Australian Copyright Tribunal said:[44]
This broad power to confirm or vary a licence scheme has its source in a declaration made by the United Kingdom at the Brussels Conference, convened in 1948 to consider the Berne Convention. Referring to the exclusive right of authorising the public performance of dramatic, dramatico-musical and musical works conferred on their authors by Art 11, the United Kingdom declared, and a number of other countries, including Australia, associated themselves with this declaration, that it “reserved its freedom to promulgate legislation where necessary in the public interest to oppose or remedy the abuse of this right by copyright owners within the United Kingdom”: Ricketson, The Berne Convention for the Protection of Literary and Artistic Works: 1886-1986 (1987), p 111. The remedy adopted in Australia was the establishment of the Copyright Tribunal, following a recommendation of the Spicer Committee. The tribunal has been made the guardian of the public interest in the fixing of the terms upon which various licences may be granted.
[70] Counsel agreed that the Tribunal’s power extends to the terms of the licence to be granted under the proposed scheme. A licensing scheme as defined includes its terms, and it is the terms that may be referred to the Tribunal under s 149(1). Mr Brown accepted that if a single licence fee was not reasonable for all licensees falling into a class, the Tribunal might insist upon “more nuanced” classes. He also accepted that the Tribunal might vary the scheme by changing the pricing mechanism to reduce cross-subsidies, provided the mechanism was common to all licensees.
[71] There are limits to the Tribunal’s power under s 149. It does not extend to substituting another, entirely different scheme for that proposed by the licensing body; the Act does not compel owners to license their copyright works and if the Tribunal finds a proposed scheme wholly unreasonable its remedy is to deny the scheme confirmation.[45] Nor, as the Court held in AVCOS, does the jurisdiction extend to varying a scheme on a licensee-by-licensee basis. That would be antithetical to the scheme of the Act, which provides separately for individually negotiated licences and does not generally confer upon a prospective licensee the right to seek a licence from the Tribunal, otherwise than pursuant to a scheme.[46] It would also be inconsistent with s 149 itself: as noted above, an applicant who is not the scheme’s operator must be an organisation claiming to be representative of persons requiring licences and the section does not specify that the Tribunal may vary a proposed licence on a licensee-by-licensee basis: it provides rather that any variation must relate to “cases of the description to which the reference relates”.
[72] To say this is not to fix a minimum number of licensees for any single group of cases of a description. The Tribunal may vary a proposed scheme by establishing a group of cases to which different terms apply provided the confirmed terms are available to any prospective licensee who fits the group’s description. The fewer the prospective licensees falling into the group, the more reluctant the Tribunal may be to provide separately for them. But it all depends on the circumstances. Where a class nominated by the scheme’s operator is sufficiently heterogeneous, the Tribunal may find that division into groups offers benefits that outweigh any associated increase in transactions costs. The size of any single group or class is but one relevant consideration.
[73] We make one final point. Mr Katz argued that if AVCOS is correct s 161 does not assist the universities, for it cannot apply within a scheme or to licensees under a single scheme; further, the section is confined to cases where there exists a comparable scheme. This is to misread s 161, which permits, in any reference or application, comparison to licences granted to other persons in similar circumstances. It is also to read too much into AVCOS. As we have explained, a reference relating to a licensing scheme may affect not the entire scheme but cases of a description to which it applies, and the Tribunal’s jurisdiction under s 149 is not confined to varying schemes as a whole. For these reasons we do not accept that
s 161 is irrelevant where the Tribunal is dealing with a reference comprising a subset of cases affected by a scheme. More than that it is not necessary to say.
[74] The appeal is allowed. With respect to the cross-appeal, we have confirmed and explained what was said in AVCOS. As a formal matter, we dismiss the cross-appeal.
[75] This having become something of a test case, counsel agreed that costs should lie where they fall. We order accordingly.
Solicitors:
James
& Wells, Auckland for Appellant
Jackson Russell, Auckland for
Intervener
[1] Copyright Act 1994, s 2.
[2] There is no evidence to that effect and CLL vigorously denies it, but for purposes of argument we will assume it may be true.
[3] Audio-Visual Copyright Society Ltd v University of Auckland [2002] NZCA 287; [2003] 1 NZLR 417 (CA) at [29].
[4] Copyright Licensing Ltd v The University of Auckland [2013] NZCOP 18 [Tribunal decision].
[5] The University of Auckland v Copyright Licensing Ltd [2014] NZHC 2281 [High Court decision].
[6] The appeal is brought by leave of the High Court: The University of Auckland v Copyright Licensing Ltd [2014] NZHC 2281 [Leave decision].
[7] Copyright Act 1994, s 14.
[8] Section 16.
[9] They are public goods, in the economists’ jargon.
[10] Christian Handke and Ruth Towse “Economics of Copyright Collecting Societies” (2007) 38 International Review of Intellectual Property and Competition Law 937 at 938-939; Kevin Garnett, Gillian Davies and Gwilym Harbottle Copinger and Skone James on Copyright (16th ed, Sweet & Maxwell, London, 2010) at [27-02].
[11] The term is defined more fully in s 2.
[12] Handke and Towse, above n 10, at 939–940.
[13] At 942.
[14] Richard Watt Copyright and Economic Theory: Friends or Foes? (Edward Elgar Publishing, Northampton (MA), 2000) at 192.
[15] Section 150(1).
[16] Tribunal decision, above n 4, at [62] and [104].
[17] Footnotes removed.
[18] Trustpower Ltd v The New Zealand Press Association COP Wellington COP14, 27 July 2005.
[19] Performing Right Society Ltd v Working Men's Club and Institute Union Ltd [1988] FSR 586 (Ch) at 592, quoted in Tribunal decision, above n 4, at [115]. The elements of a scheme are discussed in a limited range of other cases. Universities UK Ltd v Copyright Licensing Agency Ltd [2002] RPC 36 (UK Copyright Tribunal) at [58], referred to in Tribunal decision at [119], found that an arrangement where the terms on which licenses will be granted were not standardised did not meet the definition of a scheme. This requirement is reiterated in AVCOS, above n 3, at [30] and in Candy Rock Recording Ltd v Phonographic Performance Ltd CT34/1996, 6 November 1996.
[20] Tribunal decision, above n 4, at [110].
[21] At [114].
[22] Ibid.
[23] High Court decision, above n 5, at [20]–[21].
[24] At [27].
[25] At [28] and [30].
[26] At [32].
[27] Section 212.
[28] Drew v Attorney-General [2001] NZCA 107; [2001] 2 NZLR 428 (CA) at [11]; New Zealand Fire Services Commission v Ivamy (1995) 8 PRNZ 632 (CA) at 633; and see Wellington City Council v Woolworths New Zealand Ltd [1996] 2 NZLR 436 (CA); and Lai v Chamberlains [2005] 3 NZLR 291 (CA).
[29] R v Gordon-Smith [2008] NZSC 56, [2009] 1 NZLR 721 at [24].
[30] Interpretation Act 1999, s 33.
[31] Interpretation Act 1999, s 4(1); and JF Burrows and RI Carter Statute Law in New Zealand (4th ed, LexisNexis, Wellington, 2009) at 428—429.
[32] Definitions include: "any set of persons or things grouped together, or graded or differentiated from others, esp. by quality" Tony Deverson and Graeme Kennedy (eds) The New Zealand Oxford Dictionary (Oxford University Press, Melbourne, 2005) at 202–203; "A number of individuals (persons or things) possessing common attributes, and grouped together under a general or 'class' name; a kind, sort, division." J A Simpson and E S C Weiner The Oxford English Dictionary Volume III (2nd ed, Clarendon Press, Oxford, 1989) at 279.
[33] We do not find anything to the contrary in New Zealand Press Association Ltd v Trustpower Ltd [2006] BCL 343 (HC).
[34] Tribunal decision, above n 4, at [110].
[35] Universities UK Ltd v Copyright Licensing Agency Ltd, above n 19, at [5] and [59].
[36] Performing Right Society Ltd v Working Men’s Club and Institute Union Ltd, above n 19, at 592; AVCOS, above n 3, at [31]; Universities UK Ltd v Copyright Licensing Agency Ltd, above n 19, at [58]; Saturn Communications Ltd v Sky Network Television Ltd (1997) 8 TCLR 26 (COP) at 32 and 34; New Zealand Press Association Ltd v Trustpower Ltd, above n 33, at [13]; Candy Rock Recording Ltd v Phonographic Performance Ltd, above n 19.
[37] Universities UK Ltd v Copyright Licensing Agency Ltd, above n 19, at [50], [54], [57] and [58].
[38] Saturn Communications Ltd v Sky Network Television Ltd, above n 36, at 32; Audio-Visual Copyright Society Ltd v The University of Auckland COP 12/00, 9 April 2001 [AVCOS Tribunal decision] at 11.
[39] The Association of Independent Radio Contractors Ltd v Phonographic Performance Ltd PRT35/78, 25 May 1979 (UK Performing Right Tribunal) at 11; and see generally Saturn Communications Ltd v Sky Network Television Ltd, above n 36.
[40] Hugh Laddie, Peter Prescott and Mary Vitoria The Modern Law of Copyright and Design (4th ed, LexisNexis, London, 2011) at [27.24].
[41] This Court is reluctant to depart from its earlier decisions, having regard to the importance of certainty and stability in the law, but it may in rare cases modify or overrule them: R v Chilton [2005] NZCA 295; [2006] 2 NZLR 341 at [83]–[100]. For reasons given in this judgment, we consider that AVCOS was correct.
[42] Copyright Act 1994, s 151.
[43] Universities UK Ltd v Copyright Licensing Agency Ltd, above n 19, at [62].
[44] Australasian Performing Right Association Ltd v Federation of Australian Radio Broadcasters Ltd [1999] ACopyT 4, (1999) 46 IPR 20 (Australian Copyright Tribunal) at 21.
[45] Trustpower Ltd v The New Zealand Press Association, above n 18, at [92].
[46] Sections 157–160. As noted above, a person whose case is excluded from a scheme may apply for a licence under s 153 where the case is so similar to those covered by the scheme that it would be unreasonable not to deal with it in the same way. Such licence nonetheless derives from a scheme. So far as cases not covered by a scheme are concerned, s 157 provides that a prospective licensee to whom a licensing body “proposes to grant” a licence may refer the licence to the Tribunal, and s 158 provides that the Tribunal may make an order that is tantamount to renewal of an existing licence.
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