Ruling is music to the ears of service industry

This article was first published in Copyright World, April 2010

In 12 February 2010, Mr Justice Arnold gave judgment in an appeal by PPL (Phonographic Performance Limited) against a decision of the Copyright Tribunal'.

The Tribunal decision related to three of PPL's tariffs, covering the public performance of broadcast sound recordings in pubs, bars, restaurants and cafes; shops and stores; and factories and offices. The decision is relevant to premises like these which play broadcast music in public — for example by having the radio on.

PPL's tariffs had been ruled unreasonable by the Tribunal, and PPL had been ordered to revert to its previous tariffs with the addition of a 10% increase. Mr Justice Arnold has endorsed the Tribunal decision.

The tariffs in question came into force in 2005 following amendments to the Copyright Designs and Patents Act 1988 (CDPA). The effect was that public performances of broadcast sound recordings (such as on the radio) required a licence from PPL, when previously they had not. The increase in the tariffs varied, but in the main they were significant, resulting in considerable increases to the licence fees collected by PPL.

At the same time, the Tribunal's jurisdiction was extended so it could make appropriate enquiries to establish whether a licensing scheme was reasonable in the circumstances. After making such enquiries the Tribunal must take into account factors specified in the CDPA including the commercial benefit to the licensee and the size and nature of
the audience.

A number of interested parties objected to the new tariffs. They included the British Hospitality Association and the British Beer and Pub Association and a music user consortium.

The Tribunal took the view that it was for it to form its own view on the reasonableness of the tariffs, taking into account comparable licences, and having made enquiries. It was satisfied it had made appropriate enquiries by considering the submissions made by all parties.

Whether the previous tariffs were the appropriate comparable was a key issue. PPL argued that they were not and that the changes to the CDPA, PRS tariffs, and the factors set out in the CDPA were also relevant.
The Tribunal concluded that the previous tariffs were a close comparable. It did not accept that PRS tariffs were comparable because direct comparison with PRS licences was not in their view possible. Nor did the statutory factors justify the increase because there was no correlation between them and the level of increase. However, the changes to the CDPA did justify a 10% increase on the old tariffs.

The Tribunal therefore ordered the old tariffs to be reinstated with effect from 1 January 200.5, with the addition of a 10% increase in most cases, and ordered PPL to repay overpayments made by licensees as a result of the new tariffs.

It is well established that appeals from the Tribunal can only be made on points of law.

In the appeal PPL argued that the Tribunal had made procedural errors and failed to make appropriate enquiries, including in relation to the comparability of the PRS tariffs and the new tariffs. The judge disagreed.

PPL also argued that the Tribunal had been wrong on a number of other points, including whether or not the previous tariffs were the best comparable and that the Tribunal had failed to take into account the increase in uptake of licences as indicating positive market reaction to the tariffs. Mr Justice Arnold took the view that the Tribunal had not erred on these points either. He did say that lie thought it would have been preferable for the Tribunal to spell out its reasoning on some points (such as the market reaction point) but that the Tribunal's reasoning was clear enough and there was nothing to suggest an error of law. PPL's appeal was dismissed.

The upshot of the case is that PPL will have to refund the difference between licence fees paid under the new tariffs and those payable under the amended old tariffs, going back five years. PPL could be forced to refund more than £20 million.

Industry bodies are heralding the judgment as a vindication of their case and their persistence. PPL, on the other hand, have publicly stated that they are disappointed that they are left with tariffs which undervalue the rights of their members.

This result is not necessarily surprising as the appeal was based on a point of law. However, it could have a far-reaching effect. Performers, particularly session performers, are reliant on PPL income as they often do not receive large advances in the same way featured performers do, and a reduction in the licence fees charged to licensees for the use of recorded music in public will have a direct impact on their earnings. Payments to PPP's members could also be affected due to the size of the refund it must now pay.

Clearly the rates payable by licensees should not be punitive (so as to prevent the use of music in public areas), hut shops- and pubs which play music on their premises do so because they recognise how much it enhances the experience for their customers and even in some cases how it can help identify their brand. While they may argue that radio stations already have their own PPL licences for broadcasting music to the public, and so them merely having the radio on their premises should not attract a further rate, the original licence merely covers the broadcast itself and to then play such station to the general public is again a benefit to the customers listening to that music and so should require a further licence to be obtained.

Notes
I . Phonographic Performance Limited v The British Hospitality Association and other interested parties.

Authors:
Shireen Peermohamed
Chloe Wright