Intellectual Property Law Updates

Law Updates also provides hyperlinks to other sites which may be of use or interest to students and those involved in the music industry. These are provided at the end of Law Updates under 'Music Business Law Links'.

This resource is compiled by Ben Challis. Ben is a UK lawyer specialising in entertainment law and a graduate in law from Kings College London and The City University. He also holds the degree of Master of Arts in Mass Communications from the University of Leicester. Ben is a fellow of the Royal Society of Arts. Ben acts as General Counsel for 3A Entertainments, one of the UK's leading concert promoters, and is Executive Producer for television of the Glastonbury Festival. Glastonbury is the UK's leading music and arts festival attended by over 150,000 people. For Glastonbury, Ben combines the role of managing the Festival's broadcast and other media rights alongside acting as General Counsel for the Festival. Ben's other clients have included the Prince's Trust, the Granada Media Group, Pioneer LDCE and British Telecom. Ben regularly writes articles and other material on music business and intellectual property law, contributes to books and is a regular conference speaker in particular on the live music industry. He is currently preparing a collection of cases and materials on music business law for publication. Ben is a visiting Senior Lecturer in Law at Buckinghamshire Chilterns University College in England and sits as a magistrate (Justice of the Peace) in Hertfordshire, England.

We are interested in your views on the Law Updates resource. Please forward any comments to : musiclaw01@aol.com

January 2005

TAXATION
Artists, Sponsorship
-Court of Appeal hold no taxation without residence Agassi v Robinson (Inspector of Taxes) (2004)-
The Court of Appeal has held that income tax was not chargeable on a proportion of Andre Aggasi's sponsorship payments made by a non-resident company to the sportsman's own company which had no UK tax presence. In overturning the decision of Lightman J the Court of Appeal applied the decision of the House of Lords in Clark v Oceanic Contractors Inc (1983) 2AC 130 that there was a general presumption in UK law that a taxing statute did not have an extra territorial effect.
The Court of Appeal acknowledged that Mr Agassi visited the UK each year to play tennis tournaments and that his company received payments from sponsors which derived in part from his playing at those tournaments. The Court held that whilst at first look two sections of the Income and Corporation Taxes Act 1988 might apply to Mr Agassi in fact neither did. Section 18 which imposed a charge irrespective of the recipients residence but could not apply as the payments were made not to the recipient but his company. Sections 555 and 556 of the Act (when taken together with the Regulation 7(2) of the Income Tax (Entertainers and Sportsmen) Regulations 1987) provided that any activity, however transient, would count as an exercise of trade in the United Kingdom and section 555(2) of the Act provided for a collection mechanism when a company was used. However it was here that section 555(2) could not apply because of the presumption in Oceanic and that the Lightman J had erred when finding that the territoriality principle did not apply.
Lord Justice Buxton said that foreign entertainers and sportsmen with UK activities were charged tax on (i) payments made directly to them even by a person with no connection in the UK and (ii) on payments to associated companies where the payment is made by a person with a UK tax presence. Here Mr Agassi was not be to treated as the person to whom the payments had been made for the purposes of the 1988 Act.

COMMENT : The case is important for entertainers as much as for sportsmen and women but it will be interesting to see if the UK legislature now moves to provide for a taxable charge where associated companies are used by entertainers to receive sponsorship monies outside of the UK from non-UK companies but where some or all of the activities being sponsored take place in the UK.

Sources: The Times Law Report 27 November 2004 and Judgment 19 November 2004.

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COPYRIGHT
Record Labels
-BPI say piracy suits justified-
Quickly following on from EMI's positive results for 2003-2004 which showed album sales of 237 million to the end of September 2004 and a positive fourth quarter for both traditional and online sales Peter Jamieson, chair of the British Phonographic Industry has said that legal actions taken against unauthorised fileshares was justified and had been 'vindicated'. EMI's figures for album sales showed increased growth and the combined sale of CD singles and download singles through legal sites such as Napster, iTunes and SonyConnect showed a 9% increase in sales. 26 pirates had law suits issued against them in the UK as part of a Europe wide initiative by the IFPI. The BPI indicated that from 2005 download single sales would feature in the UK singles charts and that mobile ringtone sales were also being considered. About 1.75 million singles were purchased in the fourth quarter to September 04 compared with 7.3 million physical singles. The BPI said that download sales were running at up to a quarter of a million units per week.

Sources: The Times 27 November 2004, and the official BPI website - www.bpi.co.uk

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COPYRIGHT
Film, Television, Record Labels, Music Publishers
-UK Film Council asks for new measures to fight film piracy-
The UK Film Council has asked for a register of car boot sales and market traders in an effort to stop pirate copies of new films entering the UK market, even before theatrical release in the UK. The Film Council have identified camcorder recording in cinemas as an ongoing problem but also point out that films are leaked from post-production houses and copied from critics review copies. The British Academy of Film and Television Arts (BAFTA) has substantially reduced the number of DVDs its voting members receive from film distributors for their Orange Film Awards in an effort to reduce the number of source DVDs in circulation. The Film Council have asked that market and car boot traders dealing in DVDs should have to register with Trading Standards 21 days before any sales are made. They have also asked that camcorder filming in cinemas becomes a criminal offence. The Federation of Copyright Theft (FACT) seized 314,000 illegal videos and DVDs in 2001, 607,000 in 2002 and nearly two million infringing copies in 2003. The Motion Picture Association of America estimate that 36 million illegal DVDs were sold in Britain in 2003 compared with 145 legitimate copies (which generated billion in sales). FACT says that the consequent loss of revenue from hard copy pirate copy sales alone was million.

See: www.fact-uk.org.uk

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COPYRIGHT & PERFORMERS' RIGHTS
Artists
-The Wall school choir seek royalties-
The original choir members who featured on Pink Floyd's The Wall are looking to receive royalty payments for their performances. The children who were at the Islington Green School in 1979 took time out of lessons to record the contribution at Britannia Row with the help of their music teacher. Through the website www.friendsreunited.com a number of original choir members have got together and have asked PAMRA, the Performing Artists Media Rights Association, to collect royalties on their behalf. The Wall album has sold 12 million copies worldwide. At the time the children's school received a payment of 00. Not all of the choir members have yet been confirmed or identified and it appears that no paperwork exists from the session.

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PRACTICE
All Areas
-New York Judge waxes lyrical-
New York judge delivered a fairly unusual summary of his decision in a case of medical malpractice using lyrics to make his point. The case involves Dr Gil Lederman who is accused of forcing George Harrison to autograph a guitar on his deathbed. Dr Lederman had applied for a change of trail venue claiming he could not get a fair trial in Staten Island. Judge Robert Gigante agreed saying "Something in the folk he treats .... attracts bad press like no other .... he's in our jurisdiction now ... he gets Beatles autographs somehow ...." adding (with apologies to George Harrison) "If this case I were to keep, The Defendant would surely weep". The case will be moved to Albany.

Source: The Times 26 November 2004

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COPYRIGHT
Record Labels
-Mark Morrison barred from releasing his own album-
Mark Morrison latest comeback attempt has stalled after his new record label obtained an injunction blocking a release with any other label. The label, 2Wikid, owned by Everton footballer Kevin Campbell, claims to have invested hundreds of thousands of pounds funding the recording of the album, and has obtained a court order prohibiting Morrison, Mona Records Limited or distribution form Jet Star Phonographics from releasing the album or any of its tracks.

Source: The Guardian 13 December 2004

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DEFAMATION
Artists
-George Galloway wins battle against Telegraph over 'Saddam' libel-
ARTICLE by Jonathan Coad
Judgment had been handed down by Mr Justice Eady in the bitterly fought battle between George Galloway MP and The Telegraph over allegations published in April 2003 that he had received money from Saddam Hussein's regime, which Mr Galloway had always denied. From a legal perspective the important part of the case was how it was defended by The Telegraph in order to avoid being found liable to pay damages to Mr Galloway for the allegations, and the reasons why the judge upheld the claim. The allegations published in The Telegraph were undoubtedly seriously defamatory of Mr Galloway. According to the judge they conveyed to "reasonable and fair minded readers" that:

(i) Mr Galloway had been in the pay of Saddam Hussein, secretly receiving around ,000 a year.

(ii) Mr Galloway diverted monies from the Oil-for-Food programme, thereby depriving the Iraqi people (whose interests he had claimed to represent) of food and medicines.

(iii) He probably used the Mariam Appeal as a front for personal enrichments.

(iv) His actions were tantamount to treason.

Significantly, it was no part of The Telegraph's defence to claim that any of these allegations were true, or even that there were reasonable grounds to suspect that they were true - i.e. two possible versions of a defence of justification.

The Telegraph's primary defence was that their coverage of the story had been no more than "neutral reportage" of documents discovered by a reporter in the badly damaged Foreign Ministry in Baghdad. However, the judge had no hesitation in concluding that the nature, content and tone of The Telegraph's coverage of the discovery and content of the documents which gave rise to the allegations were no such thing, commenting: "They did not merely adopt the allegations. They embraced them with relish and fervour."

In finding for Mr Galloway, the judge also found that when he was interviewed shortly before publication of the allegations he was not given the opportunity of reading the Iraqi documents beforehand, and nor were they read to him. He did not therefore have a fair or reasonable opportunity to make enquiries or meaningful comment upon them before they were published. All he had was the attempt by The Telegraph's reporter to summarise the documents concerning the Mariam Appeal which the judge described as "rather garbled".

The Telegraph also failed to put to Mr Galloway during the course of the interview their intention to publish the allegations of personal enrichment. It therefore failed to give him a proper opportunity to respond in advance to these very serious allegations. It also published his denials in a way which left the reader in no doubt that they were unreliable.

The judge therefore concluded that The Telegraph was under no social or moral duty to make the allegations that it did about Mr Galloway at the time of publication, which it had made no attempt to verify. Accordingly The Telegraph was not protected by common law privilege, and specifically not under the principles set out by the House of Lords in Reynolds v Times.

The judge also rejected any suggestion that the allegations published by The Telegraph were protected by the defence of Fair Comment.

The judge concluded that in order to restore Mr Galloway's reputation he should be awarded ,000 by way of damages. He also observed that this was almost certainly less than would have been awarded before the recent downturn in libel damages in the last few years, taking into account the European Court of Human Rights' decision in Tolstoy v United Kingdom, and the Court of Appeal guidance in Elton John v MGN.

The judge's rejection of the latest attempt to mount a Reynolds style defence to very serious allegations published by a newspaper constitutes a further warning to the media that it will have to abide much more closely by the guidance of the House of Lords in that case before expecting a court to exonerate publications which can have a catastrophic effect on the life of an individual and seriously mislead the public. In particular, if it is to rely on the "mere reportage" defence a newspaper must not both vigorously adopt the allegations as true, and publish the claimant's denials only contemptuously to dismiss them.

Jonathan Coad, solicitor.

This update is e Simkins Partnership. This bulletin is for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. The simkins website is at www.simkins.com

COMMENT : A number of media commentators argued that the decision by Mr Justice Eady put the laws of defamation 'back twenty years' and would inhibit free speech and press freedom. Dan Tench in the Guardian (Media, p14, December 2004) said that Galloway's success came as an 'unpleasant shock to the media' and seemed to 'dilute the celebrated Reynolds defence'. But it is equally fair to comment that the judge fully acknowledged the Reynolds defence - in fact he applied the ten point checklist set out by Lord Nicholls in the 1999 Reynold's judgment, but came to the conclusion that on the facts of this case the Telegraph's reporting was not reasonable or neutral. In the same issue of the Guardian Roy Greenslade argues that a headline 'MP in Saddam's Pay Defends Himself From ,000 Villa in The Algarve" had a prejudicial spin and that in this case the Telegraph was unfair to Galloway and arguably inaccurate.

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COPYRIGHT
Record Labels, Film, Technology
-Twenty Eight Arrested in Scottish Raids-
Central Scotland Police have completed their most successful anti-piracy raid in Scottish history. In a five-day operation officers from the Computer Crime Unit of Central Scotland Police, working with investigators from the UK record industry's trade association The BPI (British Phonographic Industry) and FACT (Federation Against Copyright Theft) seized in excess of million worth of counterfeits - making 28 arrests in the process. The operation, codenamed Vendura, began several months ago when officers from the Central Scottish Police Computer Crime Unit, with assistance from anti-piracy officers from the BPI, began gathering intelligence at the local Scottish markets where the counterfeit trade is rife. Officers made their first move with dawn raids on houses in Tullibody, Falkirk, Grangemouth and Alloa. Police made a number of arrests at the scene as thousands of counterfeit CDs, DVDs and computer software and games were seized - complete with duplication equipment capable of creating hundreds of discs per day. Police then headed for Falkirk Market, a known hotspot for counterfeit goods, and arrested seven individuals, two of whom who investigators suspect to be "big players" in a targeted raid on their stalls as the market opened. The Sunday market in Stirling is another piracy hotspot, and a 7am raid led to two males being arrested outside their homes with their cars overloaded with counterfeit material suspected to be destined for sale at the market. A further 10.30am raid on one stall led to four arrests and further seizures before later raids on their homes uncovered yet more counterfeit stock. Later that morning - another male was detained arrested arriving at the market with counterfeit stock. His house was later searched and duplication equipment was recovered. The illion worth of counterfeit goods included 3,992 music CDs with both counterfeits (fake copies of chart albums, such as 2004 best-selling albums from Keane, Dido and Snow Patrol) and pirates (unauthorised single compilations and greatest hits albums) seized along with bootlegs (illegal recordings of live concerts). In addition 2,979 film videos and DVDs were seized including best selling Christmas titles such as Shrek 2 and Harry Potter and the Prisoner of Azkaban along with new pre-release films such as The Incredibles and Bridget Jones: The Edge of Reason. Duplication equipment with a value running into the tens of thousands of pounds was also seized, including 21 high-speed, high-capacity PCs, 2 additional "multi-burners" stacks of DVD and CD burners capable of creating thousands of fake discs per week, 15 colour printers and 6 scanners for inlay cards and fake packaging, 4 additional hard drives, for storing album artwork and "ripped" music and film masters for duplication, 12 monitors and thousands of blank CDRs, DVD-Rs, CD and DVD cases.

Source: www.mi2n.com/press.php3?press_nb=74286

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COPYRIGHT
Record Labels, Film
-Japanese crack down on piracy-
A Japanese man has received a suspended three year jail sentence for distributing films over the internet. Yoshihiro Inoue, 42, was found guilty of violating copyright law Tuesday in Kyoto District Court, a court official said on condition of anonymity. Kyodo News quoted presiding judge Yasuhide Narazaki as saying Inoue disregarded the efforts of copyright-holders, and his crime was a serious offense against the protection of intellectual property. Inoue was arrested in November last year on suspicion he placed Hollywood movies on the Internet to allow swapping of video files.
In a separate action Isamu Kaneko, who developed the free file-sharing software called Winny, is on trial in the same court. His verdict date has not been set. Kaneko, an instructor at the prestigious University of Tokyo, was arrested in May on charges of violating copyright laws. He was also accused of helping Inoue disseminate material on the Internet with Winny. Kaneko is the first file-sharing software developer arrested in Japan. His defence team says there are no laws against developing file-sharing software and say that arresting someone for designing software is a serious threat to personal liberty. They added that the action is making software developers in Japan nervous that new innovations may be declared illegal and incur legal liabilities and/or individual prosecutions. Kaneko's has drawn widespread support from bloggers (who write internet journals) who have donated money to his defence fund. Kaneko was released on bail in June on a 5 million yen ($49,000) bond. Winny has become a major headache for digital content providers in Japan; the software claims that it protects users' identities. The program allows users to trade files without revealing their Internet Protocol address - the online equivalent of a phone number. Violating copyright laws in Japan can bring up to three years in prison or a maximum fine of 3 million yen ($29,000). The Japanese action against Kaneko for developing the software comes at the same time as the Australian record industry brings legal action against Sharman who own Kazaa file sharing software.

Source: http://www.bizreport.com/news/8428/

For more information in this area and in particular the position and liability of those who provide software, equipment and services which could potentially facilitate peer to peer file swapping and illegal downloading and music, technology and copyright infringement in the digital age, see the article 'Don't Shoot The Messenger' by Ben Challis at : www.musicjournal.org/03dontshootthemessenger.html

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COPYRIGHT
Record Labels
-I-tunes faces European inquiry over pricing-
Apple will face a European Commission inquiry over the price United Kingdom downloaders have to pay for using the service. Typically a UK download costs 79p but a mainland European download E99, or 68p at present exchange rates. Consumers can only download in a country where they hold a relevant bank account registered. Apple holds around 70% of the global download market although now faces growing competition from services such as Sonyconnect, Mycokemusic, HMV and now in the UK superstore Tesco.

See: www.guardian.co.uk/arts/netmusic

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COMPETITION
Record Labels
-Indies challenge SONY-BMG Merger -
IMPALA, which represents Europe's independent labels, has mounted a legal challenge to the BMG-Sony merger by launching a claim in the European Court of Justice (court of First Instance) in Luxembourg saying that the merger could have legal, cultural and political and economic implications and that the European Commission, which passed the merger, made mistakes when considering the merger and the implications it will have on the market in sound recordings.

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COPYRIGHT
Computer Software, Music Publishing, Trade Mark
-Navataire v Easyjet (2004)-
by Tom Frederikse
A software designer has failed in his attempt to protect certain aspects of his computer program when the High Court ruled that there is no copyright in the user interface (the visual front-end) of an application. In a complex 111-page judgment of 30 July 2004 (only published in December so that the confidential information could be censored), Navataire, the software designer, lost on most claims but won some others.

Navataire had supplied a software system for tickletless airline booking to easyJet, but easyJet subsequently hired their own software developer, Bulletproof Technologies Inc, to deliberately design a new system with the same "look" as, and to achieve the same results as, Navataire's program. While admitting that none of the underlying software in the new system copied the old one and that Bulletproof had no access to the source code and did not "decompile" the old system, Navataire nevertheless claimed that their copyright was infringed by something called "non-textual copying" of the work as a whole, or of the various "modules" of the system.

Put more simply, it was alleged that easyJet had copied the plot of the story without taking the words by stealing the "look and feel" and many of the basic commands of the program. Alternatively, this way of setting out the computer screen and keying in simple commands, such as "A" for availability and "N" to name a passenger, was said to be a "business method" in which copyright subsisted. In technical terms, it was alleged that easyJet had copied the Graphical User Interface ("GUI") and the command line interfaces and codes of the application. The most commonly argued copyright issue, whether the copying was "substantial", was applied only to the copying of the source code, though Navataire admitted that little or no source code was copied. It was also admitted by easyJet, however, that about 44% of the original command set had been reproduced and the visual interface and basic functionality seem to have been nearly identical.

The court found that the command names were not protectable as copyright "literary" works because, like the word "Exxon" in a 1982 case, the individual words reflected insufficient "skill and labour" and were merely labels for the underlying work. The set of commands was also not protectable as a "compilation" because they amounted to a "computer language" which must be kept free for use by all programmers, though the works expressed in that language may be protected. Furthermore, a "business method" was in itself not protectable by copyright. The screen layouts ("GUI screens") and the icons for the program were protectable, but as artistic works. The court said that both plainly exhibited sufficient skill and labour to be considered as copyright works.

Thus, while the court did not explicitly say that there is no such thing as "non-textual" copying, it came close: "Take the example of a chef who invents a new pudding - using his written recipe, undoubtedly a literary work. Along comes a competitor who likes the pudding and resolves to make it himself. Ultimately, after much culinary effort, he succeeds in emulating the earlier result and records his recipe. Is the later recipe an infringement of the earlier, as the end result, the plot and purpose of both (the pudding) is the same?" Mr. Justice Pumfrey said the answer is no. There is no copyright in the pudding itself.

The full text of the judgment can be accessed via: http://www.bailii.org/ew/cases/EWHC/Ch/2004/1725.html

This update is e Simkins Partnership This bulletin is for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Past Simkins partnership bulletins can be found on our website at : http://www.simkins.com/ebulletins/archive/default.aspx

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CONTRACT
Live Music Industry
-Jury orders booking agent and artist lawyer to pay damages of $1.6 million-
In an unusual decision a US jury has awarded a damages of US$1.6 million to promoters of a cancelled Rod Stewart tour and ordered the return of a $780,000 deposit held by Mr Stewart as compensation. The Los Angeles jury found in favour of concert promoters in Peru, Argentina (including the Vina del Mar Festival) and for Oklahoma based promoters PM Group. The damages order was made against Rod Stewart's lawyer and his then booking agency, ICM. The dispute related to a 9 date tour of South America planned for February 2002. The deposit was against a total $2.1 million fee which was cancelled in February. The tour was cancelled after disputes regarding the contract which the claimants have said contained new terms and was negotiated by Mr Stewart's lawyers rather than ICM. New provisions included new costs for the promoters including the provision of hotels, airfares and frieght costs. However it was ICM who held the tour deposit and cancelled the dates when the balance of the outstanding tour fee and executed contract were not forthcoming. The decision will be appealed.

Source : Audience Magazine, December 2004, Issue 58

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COPYRIGHT
Record Labels, Music Publishers, Technology
-Canadian MP3 Player levy ruled illegal-
Consumers may soon be paying less for MP3 players after the Federal Court of Appeal ruled that special copyright levies applied to digital music players are not legal. A 71-page decision by Mr. Justice Marc Noël found that although the Copyright Board of Canada was seeking to protect music writers and performers from the "harm" caused by digital copying of music when it imposed the MP3 levies last December and that such a levy might be desirable, the Board did not have the legislative authority to do so. Canada's Copyright Act gives the federal board the authority to apply levies on blank media such as compact discs and audio cassettes. But the wording of the act has not kept up with the new technology of MP3 players.
In 2004 MP3 sales are expected to generate $5-million of the $25- to $30-million in levies collected for musicians. The levies range from as little as $2 to as much as $25 per device. The biggest charge is paid by consumers of the iPods, which have among the largest capacity to store music. In Canada, the $400 price tag for an iPod includes a $25 copyright levy. As a result of Thursday's decision the levy can no longer be collected.

Source: The Globe and Mail, 17 December 2004 and see article "Don't Shoot The Messenger" by Ben Challis at : www.musicjournal.org/03dontshootthemessenger.html

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COPYRIGHT
Internet, Record Labels
-New PRS-MCPS downloads policy-
The PRS-MCPS Alliance have agreed a new distribution policy for download services. Under the new policy, data will be collected in electronic format which will then be matched to the Alliance's new PRS processing system, hopefully indetifying almost all works registered with those downloaded electronically. The licence revenue collected by the Alliance will then be distributed over works successfully matched on a quarterly basis commencing December 2004. The Alliance commission will be 12%. The Alliance will maintain the current allocation of the online share split with 'download' royalties - from the paid for download of tracks as a 'sale' - being allocated 75% to MCPS and 25% to PRS (as the mechanical right predominates) whilst being allocated 25% to MCPS and 75% to PRS for webcasting services and streaming (as this is treated in a like manner to performance or broadcast income). Revenue is allocated 50:50 between the two collection societies for other online revenue sources.

Source: M Business December 2004, Issue 14, p 27 and see : www.mcps-prs-alliance.co.uk

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05 Ben Challis