University of Auckland v Copyright Licensing Limited [2014] NZHC 1015 (15 May 2014)

	Home \| Databases \| WorldLII \| Search \| Feedback High Court of New Zealand Decisions

BETWEEN	THE UNIVERSITY OF AUCKLAND, THE UNIVERSITY OF WAIKATO, MASSEY UNIVERSITY, VICTORIA UNIVERSITY OF WELLINGTON, LINCOLN UNIVERSITY, THE UNIVERSITY OF CANTERBURY, THE UNIVERSITY OF OTAGO AND THE AUCKLAND UNIVERSITY OF TECHNOLOGY Appellants
AND	COPYRIGHT LICENSING LIMITED Respondent

Hearing:	6 May 2014
Counsel:	J Katz QC for Appellants A Brown QC and J Wach for Respondent
_Judgment:	_{15 May 2014}

This judgment was delivered by me on 15 May 2014 at 4.30 p.m., pursuant to Rule 11.5 of the High Court Rules.

THE UNIVERSITY OF AUCKLAND & ORS v COPYRIGHT LICENSING LIMITED [2014] NZHC 1015 [15

[1] This is an appeal against a decision of the Copyright Tribunal. Copyright Licensing Limited (CLL) is a not for profit copyright licensing body which represents New Zealand authors and publishers of text-based works. In that capacity it acts as agent in negotiating copyright licences on behalf of New Zealand publishers and New Zealand owners of copyright and copyright works. It also represents owners and licensees of copyright works in many overseas countries pursuant to reciprocal agreements with reprographic rights organisations.

[2] CLL has had successive licensing arrangements in place with all universities in New Zealand since 1994. Up to now these agreements have been negotiated between CLL and representatives of all the universities.

[3] In 2007, CLL and all the universities on the other part entered into a number of identical agreements which were for a term commencing 1 January 2008 and expiring on 31 December 2012.

[4] In 2012, CLL and the universities were negotiating to replace the terms of the expiring licences. I will refer later in the judgment to these negotiations, there being an issue as to whether or not it was premature for the CLL to submit its preferred terms to the Tribunal. Suffice to say that there were serious differences between the parties. There were three issues - survey of usage of copyright materials by each university; compliance; and the fee to be charged. As to the latter, the Tribunal found that the parties were at an absolute impasse. This was because CLL declined to negotiate on the basis that the fee might be below the existing fee.

[5] On 28 February 2013, CLL filed its proposed terms of agreement to replace the 2007 agreement in the Registry of the Copyright Tribunal. The preamble of the

A This agreement is one of a number of identical agreements in the same form and for the same term made between CLL and each of the specified universities by arrangement between CLL and the UNZ copyright expert group on behalf of the specified universities.

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. (Emphasis added.)

[7] The content of the document is a modification of the 2007 agreement. Materially the annual licence fee would change from $20 per equivalent fulltime student (EFTS) to $26 for the first year of the term, and thereafter should increase at the start of each year of the term at the rate of CPI. The detail of the survey and compliance provisions have changed. But for the changes, the other clauses contain those found in the expired licences.

[8] On 9 May 2013, the universities filed an interlocutory application to the Tribunal seeking a declaration as to the true nature of the document. As we have seen, it was called by CLL in paragraph A of the preamble, licensing scheme, whereas the universities contend that the document lodged is “a proposed licence”.

[9] The distinction is important to the universities. In this renewal round, universities want to be able to negotiate with the Tribunal separate prices for each university, rather than having one common price. The universities fear that if the document filed with the Tribunal is classified as a “licensing scheme”, that will not be possible. This is because of dicta in a decision of the Court of Appeal in a case

Audio-Visual Copyright Society Ltd v University of Auckland (AVCOS).¹The dicta

are contained at [29] and the first sentence of [30] of that judgment, as follows:

[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. (Emphasis added.)

¹Audio-Visual Copyright Society Ltd v University of Auckland [2003] 1 NZLR 417 (CA)

[10] To examine and explain the Court of Appeal’s reasoning, it is not sufficient to refer just to ss 149 and 150 of the Copyright Act 1994 (the Act). It is necessary to place those sections in the context of the whole Act and in the immediate context of the part of the Act in which they are found.

[11] The Copyright Act 1994 provides for New Zealand, in company with most modern economies, that the authors of work become the first owner of any copyright in the work. This is a form of statutory monopoly. The state protects the value of originality and thereby encourages creativity and innovation. Copyright is part of the general state protection of inventions. The mode of dealing with rights and

the time, and there are various forms of licences such as exclusive licences or not.

[12] It is in the public interest for inventions, including copyright works, to be available for the benefit of the wider community. So if the owner of any copyright is not prepared to licence to use the work, then persons who want to buy those rights and are so thereby frustrated either by refusal to deal, or by an unreasonable price or terms, are given the ability under this Act to obtain a licence from a statutory tribunal, the Copyright Tribunal. Essentially, the Tribunal’s task is to set reasonable terms of dealing, in sum, an equitable remuneration to the copyright owner.

[13] Sections 149 and 150 come under Part 8 of the Act which has the heading, “Copyright licensing”. A distinction is drawn in Part 8 between licensing schemes and licences. Sections 148 – 152 deal with licensing schemes and ss 153 – 160 deal with licences. “Licensing scheme” is defined in s 2 of the Act:

(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:

[14] “Licence” is itself not defined. As the definition suggests, licensing schemes contemplate more than one license being granted in respect of a work. As is apparent from the definition, licensing schemes when implemented provide for the grant of more than one licence.

[15] Where negotiations are not progressed, so that it is not “premature” to go to the Tribunal, then either the operator of a proposed scheme or an organisation claiming to be representative of persons requiring licences can refer the terms of a proposed licensing scheme to the Copyright Tribunal. This is by way of s 149 which provides:

(b) Is proposed to apply generally or in relation to any description of cases—

(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.

(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.

(4) The order may be made so as to be in force indefinitely or for such period as the Tribunal may determine. (Emphasis added.)

[16] Where there is dispute over grant of a single licence, then again either the licensing body or the prospective licensee can refer the terms to the Tribunal for resolution. This is provided by s 157:

(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. (Emphasis added.)

(a) The conclusion that the document is a reference of a proposed licensing scheme and not a reference under s 149 and not a reference of a proposed licence under s 157.

(b) The second is a challenge to the conclusion of the Tribunal that the reference has not been shown to be premature.

[18] Although not confirmed by Mr Katz QC, it appears to the Court that what the universities as a whole are now concerned about is that given that they want to go their separate ways on pricing negotiations, they fear that if this document is a proposed licensing scheme, and is subsequently approved, then they will be caught by the dicta in [29] and [30] of the AVCOS case and, in particular, the first sentence of [30]. In short, they will be locked into one common price.

[19] Mr Brown QC for CLL disputes this. He says that there is room within the substantive hearing on the merit of the document, classified as a licensing scheme, to argue for different prices, applying the power to vary undermined in s 149(3).

[20] From the Bench, I suggested that there is nothing to stop individual universities from taking advantage now of s 157(1) and filing that university’s preferred licence, given that the filing by the CLL is, in any event, also evidence of the terms upon which the CLL intends to offer that university a licence. Neither counsel for CLL or the universities agreed or disagreed with my suggestion.

[21] I mention my suggestion because I was concerned by the end of the argument as to whether or not the issue before the Court was irrelevant and so moot; in the sense of being unlikely to have any consequence, however, it is resolved. Similarly, the Tribunal has said in [107] and [108] of its decision:

[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.

[108] In all of those circumstances, it seems to me that, in this case, any differences in the extent of the tribunal’s powers depending upon whether the reference is a reference of a proposed licensing scheme or a proposed licence, may turn out to be more apparent than real. However, that is not something I need to determine on the application, and I will not attempt to do so. The issue on the application, or at least this part of it, is: “What has been referred? A proposed licensing scheme or a proposed licence?” that question must be answered by considering what has been referred to the tribunal, and the evidence produced on each side, and I do not think my decision on the “proposed licensing scheme or proposed licence” issue should be informed by whatever might be the consequences of that decision as regards the scope of what may be the subject of evidence and argument at a substantive hearing. Either what was referred was a proposed licensing scheme or it was a proposed licence. Thereafter, the cards must lie where they fall. (Emphasis added.)

[22] I am also concerned about delay. Concern was expressed by Mr Brown for CLL that the effect of this litigation before the Copyright Tribunal and now in the High Court, and potentially going to the Court of Appeal as of right, is to enable the universities to obtain a fiscal advantage from delay.

[23] In the absence of any concession by counsel, I am satisfied that my suggestion that the individual universities now simply file references under s 157 is not sufficiently clear-cut. There is no choice but for the Court to examine the merits of this appeal against an interlocutory application to the Tribunal in respect ofthe classification of the document filed by CLL as either a proposed licensing scheme or as reference to the Tribunal of a proposed licence under s 157.

Tribunal is a proposed licensing scheme or a proposed licence depends on the

application of the definition of a licensing scheme. If it is within that definition, then it is a licensing scheme.

[25] In 1997, the Copyright Tribunal, in the case of Saturn Communications Limited v Sky Network Television Limited³decided that the use of the plural in the s 2 definition of the licensing scheme could be read in the singular by reason of s 4 of the Acts Interpretation Act 1924. At 33 of the judgment the Tribunal, chaired by Judge Gaskell, said:

On the evidence before the Tribunal, it is established that there is only one class of cases in which Sky was prepared to grant licences, that being to cable television operators in New Zealand. It was not seriously contended as we understand it that some distinction should be made between the type of cable used by any particular cable television operator so as to increase the number of classes of cable television operators. We do not accept that that is a distinction which should be given any weight on the evidence before this Court.

Whether it is sufficient in terms of the s 2 definition of licensing scheme if there is only one class of cases in which Sky was prepared to grant licences, can be decided on the rule of statutory interpretation that words importing the plural also include the singular: s 4 Acts Interpretation Act 1924. There being nothing in the Act or in the context in which the expression “classes of cases” occurs, to indicate that any contrary meaning is required for the purposes of the Act, the Tribunal accepts that the plural here includes the singular. It is therefore sufficient for the purposes of the definition if there is only one class of cases which can be identified and in respect of which licences might be granted.

[26] In the course of the oral hearing I was minded to think that that was an orthodox argument, except that it is not a rule. One always being careful not to change the plural to the singular unless the context allows, and Judge Gaskell had taken context into account. But on analysis, I do not think this reasoning gives sufficient weight to the meanings of “scheme” and “class”.

[27] If this document is a proposed scheme, then it has only one class. Furthermore, it is intended in the proposal that the terms of the licence will be the same for all the members falling in that class. CLL could have simply referred this document to the Tribunal as a proposed licence applicable to each university,

_{pursuant to s 157(1). On that basis, if the document lodged is not a
scheme, but}

³Saturn Communications Limited v Sky Network Television Limited (1997) 8 TCLR 26 (COP).

rather proposed licences, then it is clearly open to the Tribunal to entertain different prices for different universities.

[28] Where a scheme has a number of classes, there will be differentiation of terms between the classes. That is the reason for classes. A “class” exits as a consequence of differentiation. The Shorter Oxford Dictionary talks of “class” in terms of “division”. A class is something which has been divided out of a larger group. So there will be at least two classes in any scheme. Normally the scheme would be the set of criteria which defines the division of the licences into classes.

That definition contemplates that there will be different classes of cases in which copyright licences will be granted, and different terms attaching to the licences for the different classes.

[30] For these reasons, with respect to the Tribunal in Saturn, I do not find that the context allows a simple application of the now s 33 of the Interpretation Act 1999 so that the plural “classes” can be read as one “class”. To do so collides with the requirement of a “scheme” or plan which functions to distinguish at least two classes within the whole set of proposed licences.

[31] What is clear from the definition of a licensing scheme in s 2 of the Copyright Act is that a document cannot become a licensing scheme simply by self- definition. Indeed, it goes the other way: “for the purposes of this definition a scheme includes anything in the nature of a scheme”.

[32] There is only one set of licences proposed here, with identical terms. They are not proposed to be differentiated further into separate classes. For this reason, I conclude that CLL has in fact referred to the Tribunal the terms upon which it proposes to grant individual licences to each of the universities and thus it is a reference under s 157(1). It is not a licensing scheme, as defined in s 2, so s 149 is

⁴New Zealand Press Association Ltd v Trustpower Ltd HC Wellington CIV-2005-485-1695, 27

[33] That being so, it is open to the universities in the merits hearing before the Tribunal to make separate submissions as to the suitability of the terms for that university. It is not therefore necessary to consider the findings in AVCOS.

[34] The universities also challenge the finding by the Tribunal that the decision by CLL to hand the matter over to the Tribunal was not premature.

[35] For the universities, Mr Katz’s principal argument was that under the terms of the expired licence, the parties were bound in contract to negotiate any new licence and that obligation needed time to elapse before it could be said to have been breached. That private obligation can inform the context, but cannot trump the statutory test of “premature”.

[36] The second argument was that the negotiations to date have been relatively informal, no draft agreement was before the parties, that discussions essentially centred around the question of fee, and the negotiations were unproductive. In October 2012, CLL put before the universities a further form of agreement substantially different from the current licence. This document lived for a period of two weeks and was withdrawn. Then, on 28 February 2013, CLL lodged the present reference with the Tribunal.

[37] The Tribunal did not see it that way. The Tribunal was impressed by Mr Brown’s argument for CLL that the parties were at an absolute impasse as to the key terms of the referred licence, particularly on price and also on survey requirements and compliance. Having considered the evidence, the Tribunal found as to the negotiations:

[184] I also accept CLL’s submission that by the time the Reference was filed, the parties had reached an impasse in the negotiations which were conducted in 2012 and early 2013. The Respondents had made it clear that they would not agree to anything more than the then-current fee of $20 per EFTS, with no CPI adjustment, and if CLL was not prepared to issue new licences to the Respondents at that rate I think it was reasonable for CLL to conclude that the prospects of agreement being reached within any reasonable timeframe were remote. And if there was an impasse on an issue which CLL saw as fundamental, I do not think that CLL could reasonably have been expected to continue negotiations on other aspects of the proposed

form of licence, knowing that no agreement would eventuate. It was entitled in those circumstances to take the view that any further negotiations would likely be a waste of time, and look to its other options. (Emphasis added to “had” in the original text.)

[38] Mr Katz did not dispute this finding of impasse. Indeed, he added to it by saying that CLL was also refusing to negotiate below $20. Mr Katz also accepted that there were significant differences between the parties on survey and compliance. Bearing in mind that these negotiations were going on in the closing months of the existing licence; keeping in mind that the word “premature” is not defined in the Act; having regard to commercial setting of this case; it was quite open for the Tribunal to decide in favour of CLL that the reference of the material to the Tribunal was not premature. It was not in any way defeating one of the purposes of the Act that there be a reasonable commercial effort to negotiate licences privately before resort is had to the regulator. For these reasons, I find the prematurity contention to be without merit.

[39] The universities succeed on the classification footing. The first decision of the Tribunal is reversed. The document is not a reference of a proposed licensing scheme. It is a reference of proposed licences under s 157.

[40] The universities are entitled to an award of costs. I reserve the question of costs. If the parties cannot agree, I seek submissions in writing by both parties limited to seven pages each, drafts to be exchanged in advance.

High Court of New Zealand Decisions

University of Auckland v Copyright Licensing Limited [2014] NZHC 1015 (15 May 2014)