Intellectual Property Law Updates

INFORMATION FOR READERS:
This resource aims to give a brief overview of developments in Intellectual Property law and other areas of law relevant to the music and entertainment industries. Each item is categorised according to relevant areas of the music or entertainment business, and by the date of uploading. Uploads are undertaken regularly and are organised on a monthly basis. These updates are designed to give general information for music and entertainment industry professionals and students interested in these areas. These Law Updates are not law reports or detailed references. Users who would like further information should research the relevant area thoroughly. Relevant references and links are therefore provided.

Law Updates also provides hyperlinks to other sites which may be of use or interest to legal professionals, academics, students and those involved in the music industry. These are provided at the end of Music Law Updates Archive under 'Music Business Law Links'. You will also find all of these links and other hyperlinks on the links page.

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

 

November 2006

---------------------------------------------------------------------------------------------------------------

COPYRIGHT / COMPETITION
Record labels, internet
Limewire files countersuit against major labels alleging anti-trust violations
Peer-2-peer software developer LimeWire has filed a counterclaim to the action brought by Warner Bros. Records, Virgin Records America, Sony BMG Music Entertainment and other music labels. The counterclaim filed in U.S. District Court in New York alleges that the record companies have engaged in unfair business practices to scare away its users. The record companies allege that Limewire’s technology provides a means for copyright infringement by illegal peer-2-peer fileswapping and downloading. In its countersuit Lime Wire alleges that the major record labels launched their own digital-distribution to “destroy any online music distribution service they did not own or control, or force such services to do business with them on exclusive and/or other anticompetitive terms". This is not the first time this allegation has been made and the major labels are facing a class action in the USA alleging that the labels first forays into digital retailing were nothing more than blocking devices to shut other companies out of the digital market. Lime Wire's suit also argues that the record companies combined and conspired to restrain trading in the market for online distribution of recorded music and, as a result, violated sections of the Sherman Act and the Clayton Act. The (separate) class action against the labels (from leading class law firm Lerach Coughlin Stoia Geller Rudman and Robbins) alleged that the major labels were fixing download pricing and that the record labels sought to shut down online music pioneer Napster at the same time they were introducing their own joint ventures to sell online music. The suit went further and alleged that the labels own download services, MusicNet and Pressplay, "were not serious commercial ventures, but rather attempts to occupy the market with frustrating and ineffectual services in order to head off viable online music competitors from forming and gaining popularity after Napster's demise"

The Recording Industry Association of America (RIAA), which has fronted the legal battle against peer-to-peer companies on behalf of the music labels, maintains that Lime Wire's business is based on copyright infringement. Limewire assert that it is merely the developer of an open source software and that people who swap files do so solely of their “own volition” and the if the case gets to court will be an important test of the rules set down by the Supreme Court in MGM vGrokster where it was held “that one who distributes a device with the object of promoting its use to infringe copyright ... is liable for the resulting acts of infringement by third parties”

Elsewhere, the RIAA, IFPI and the BPI appear to have won a major skirmish with Russian based allofMP3.com without a legal battle f ollowing the news that Visa was stopping processing payments for the site and Mastercard said it was acting likewise. Both credit card companies appear to be concerned that by allowing their customers to use their cards to buy tracks from the download platform they may open themselves up to claims of enabling copyright violation. It is thought that the XRost pre-pay card system still works (the cards can be bought via eBay). Allofmp3.com yesterday called the moves by the credit card companies "arbitrary, capricious and discriminatory", saying Visa and Mastercard "lack the authority to adjudicate the legality" of the destination. The company's owners added: "AllofMP3 has not been found by any court in the world to be in violation of any law". At the same time as the credit card companies took their action, a Danish Court ordered internet service provider tele2 to block user access to allofmp3.com. As a result the owners of the site said they would now provide FREE downloads!

http://news.zdnet.com/2100-9588_22-6119646.html

http://www.theregister.co.uk/2006/09/26/limewire_riaa_counterclaim/

MGM v Grokster 04-480 27th June 2005 (US Supreme Court) Music Law Updates Archive August 2005

---------------------------------------------------------------------------------------------------------------

COPYRIGHT
Internet
ARTICLE LINK: House Panel Tackles Piracy
This article by by Elia Powers details how The Motion Picture Association of America estimated the US film industry lost $6.1 billion to piracy in 2005 and puts the blame for a large chunk of that at the feet of students – who use college provided high speed broadband connections to illegally download films. For an interesting read on the measures some Universities and higher education institutions in the United States are taking to deal with peer-2-peer file swapping and downloading (particularly music and films)

see http://www.insidehighered.com/news/2006/09/27/piracy

---------------------------------------------------------------------------------------------------------------

COPYRIGHT
Internet
ARTICLE LINK: Streamcast found liable for copyright infringement in the USA
After the Supreme Courts decision in MGM v Grokster, the liability of the various software companies was sent back to the lower courts to decide - using the tests set up by the Supreme Court who held that “ one who distributes a device with the object of promoting its use to infringe copyright ... is liable for the resulting acts of infringement by third parties ” . Streamcast Inc, the creators of the Morpheus P2P file-sharing software, have now been found guilty by a federal judge of encouraging millions of users to exchange songs illegally. The company faces potential damages of $150,000 per track shared:
http://www.latimes.com/business/la-fi-morpheus28sep28,1,1852347.story?coll=la-headlines-business / http://www.billboard.biz/bb/biz/index.jsp

--------------------------------------------------------------------------------------------------------------- 

COPYRIGHT
Record labels
British Library voices concerns over copyright law
The British Library has voiced concerns that UK copyright law prevents the Library retaining archive copies of recorded music and other sound recordings. In a statement the Library said 'currently the law does not permit copying of sound and film items for preservation … without the right to make copies, the UK is losing a large part of its recorded culture.' 'Many original audio and film formats we hold are becoming increasingly more fragile and the statement added that such formats could 'face irretrievable decay.' Sections 37 – 45 of the CopyrightDesigns & Patents Act 1988 currently provides that “ the librarian of a prescribed library may, if the prescribed conditions are complied with, make and supply from a published edition a copy of part of a literary, dramatic or musical work [i.e. not sound recordings] … without infringing any copyright in the work, in any illustrations accompanying the work or in the typographical arrangement”. S61 provides that folk songs may be recorded for archive purposes without infringing the copyright in the music or lyrics. Words in italics added.

The British Library are asking for are a number of revisions to UK copyrights law:

http://news.bbc.co.uk/1/hi/entertainment/5378118.stm

---------------------------------------------------------------------------------------------------------------

COPYRIGHT
Internet
ASMEC Forum highlights problems in online licensing
A forum put together by ASMEC, the Association of Streaming Media Companies, has highlighted how the Collection Societies are struggling to keep up with the demands of the new media companies as they present new and varied business models which use music in a variety of ways. Presentations form both Phonographic Performance Limited (PPL) and the MCPS-PRS Alliance set out current business models and licences available to online companies. The PPL’s licences are based on a approximate payment of 0.05p per track streamed for the sound recording right (but does not include the download right which is retained by labels). The MCPS-PRS Joint Online Scheme (JOL) allows the user to use music in return for a payment of 8% plus VAT of gross revenues (subject to a minimum payment of £500 plus VAT per annum. The MCPS-PRS Alliance also had a (LOEL) Limited Online Exploitation Licence for services generating less than £4,250 in revenue per annum based on a flat fee between £50 and £400. Both of these licences cover full track downloads, clips, on demand streaming and webcasting. The presentations met with some criticisms from the Forum audience – particularly questioning why PPL online licence rates were substantially higher than those charged to commercial radio in the UK. A very clear speech from lawyer Gregor Pryor outlined the problems facing the online community against the background of legal online services attempting to launch businesses in the face of widespread piracy. Gregor noted that one of the major problems was that old business models simply don’t apply to new internet businesses and in particular the territorial nature of copyright was outdated. One contributor from the floor pointed out that to clear a track for streaming/downloading in Europe might require between forty and sixty negotiations with various collection societies and/or record labels across Europe. Whilst the IFPI have introduced a webcasting agreement this relies on destination use royalty rates (which vary across the world). The PPL also have reciprocal arrangements with 39 other collection societies for sound recordings across the world (in Europe and Australasia) but again these agreements implement destination royalty rates which vary from country to country. Music publishing collection societies do not even have this coherence as the European Commission questioned the ‘one stop shop’ system of licencing in Europe set up by the Santiago Agreement and this was scrapped in 2004. Gregor also pointed out that not all of the major rights owners agreed on a way forward and that other issues such as DRM (digital rights management) and consumer rights also had to be considered. The end result of the current raft of problems led Gregor to suggest that new licensing schemes had to be developed but this had to be done alongside new and innovative models for the licensing of copyright and payment for copyright use. The Forum also heard useful presentations from Playlouder MSP, Totally Radio and LAST FM. All of these presentations reinforced the view that the industry needs to develop innovative licensing schemes to grow the music economy - hopefully allowing both the media companies and the music industry companies to (somehow!) divide up a bigger pool of revenues.

What became apparent was that in a constantly changing market a ‘one size fits all’ approach currently used by collection societies simply doesn’t suit the needs of the users of commercial copyright. It was equally apparent that traditional views on copyrights (in particular the different ‘rights’ divided up between different societies and owners – streaming rights – podcast rights - on demand rights – broadcasting rights – download rights ) and territorial rights are simply nor shared or understood by consumers who, when faced with the non availability of music from a legal source, will in many cases simply source the music for free. This does no-one in the music industry any favours. But to be fair, the collection societies are membership societies and in a number of cases simply do not have a mandate to allow for certain uses (for example it is record labels rather than the PPL who licence download rights) or need to have members agreement before they can revise licensing schemes. But the collection societies and their members are going to have to wake up to the fact that if they cannot licence legal use then they will simply be helping the pirate/illegal services or illegal peer-2-peer file swapping – both of which will provide music to consumers without licences or payments – with no return to the music industry and the very members the collection societies represent.

The speakers at the Forum included Matt McLeer (PPL), Andy Harrison (MCPS-PRS Alliance), Paul Hitchman (Playlouder) and Martin Sitskill (Last FM). The Forum was moderated by Asmec’s Tom Lousada. The Forum was also a chance for the MCPS-PRS Alliance to announce that they had partially settled their impending Copyright Tribunal case with the BPI on behalf of its record label members, iTunes, mobile phone operators and streaming media companies. The BPI, iTunes, Vodafone, Orange, T Mobile and O2 have now agreed a royalty rate for online use of 8% of revenues. This was followed by the news that Napster, Sony Connect and Music Net have also agreed terms. The remaining matters referred to the Tribunal remain outstanding and will be heard after a short delay after the Tribunal agreed to an extension of time to allow further negotiations.

Asmec’s website is at www.asmec.org

The MCPS-PRS Alliance website is at www.prs.co.uk 

--------------------------------------------------------------------------------------------------------------- 

COPYRIGHT
Internet, music publishers, record labels
INTERVIEW LINK – New royalty models for online services
Lawyer Gregor Pryor discusses why it is not always easy for collection societies and rights owners to keep up with the wide range of new business models being presented to them by companies who want to legally exploit their copyrights. This interview was published by CMU Music Network as part of Music Tank’s ‘Think Tank’ series prior to the ASMEC Forum referred to above.

http://www.cmumusicnetwork.co.uk/interviews/copyright01.html

see also A new licensed P2P service by Prof Michael Geist at http://www.p2pnet.net/story/10126

---------------------------------------------------------------------------------------------------------------

COPYRIGHT
Music Publishing
Plagiarism case against Beyonce fails
A US judge has dismissed a copyright infringement lawsuit against Beyonce Knowles filed last year by singer songwriter Jennifer Armour. Armour claimed that Beyonce's 2003 hit 'Baby Boy' included lyrics from her song 'Got A Little Bit Of Love For You'. Armour said that the Destiny’s Child singer had had access to her song because her former manager had provided a copy of it to executives at Beyonce's record label, Columbia. Key people at Atlantic Records, who represented Sean Paul, Knowles' collaborator on the track, had also been sent a copy. This type of claim is why more and more record labels, music publishers and management companies are refusing to accept unsolicited demos and tracks – returning them unopened to songwriters and artists. However, whether or not Knowles had ever heard Armour's track was not, in the end, relevant because the court undertook a 'side-by-side' comparison of the two songs - the basic test in any copyright infringement case of this kind - and from that they ruled that the songs were
"substantially dissimilar", leading to Armour's case being dismissed.
Source CMU Daily / http://news.bbc.co.uk/1/hi/entertainment/5401632.stm

---------------------------------------------------------------------------------------------------------------



COPYRIGHT
Record labels, internet
IFPI continue actions against file swappers
Legal actions against thousands of music file-sharers across the world have been announced as the recording industry stepped up its campaign to deter copyright theft and promote legitimate use of music on the internet. Over 8,000 new cases in 17 countries are being announced today, including the first ever cases against illegal file-sharing in the two biggest markets of South America and in Eastern Europe.   A total of more than 13,000 legal actions have now been taken outside the United States. Legal actions are being extended to Brazil, where more than one billion music tracks were illegally downloaded last year and a country where record company revenues have nearly halved since 2000. Mexico and Poland are also seeing actions for the first time – while a further 14 countries are launching fresh actions against illegal file-sharing.  Over 2,300 of people have already paid the price for illegally file-sharing copyrighted material, with average legal settlements of €2,420.   Many of those on the receiving end of legal action are parents whose children have been illegally file-sharing.  They are finding that in many countries they are liable for any activities third parties undertake using their internet connection.  In Argentina, one mother made her son sell off his car to pay her back the settlement fee. The actions, a combination of criminal and civil suits, are aimed at ‘uploaders’ – people who have put hundreds or thousands of copyrighted songs onto internet file-sharing networks and offered them to millions of people worldwide without permission from the copyright owners.  The industry is targeting uploaders using all the major ‘unauthorised’ P2P services, including BitTorrent, eDonkey, DirectConnect, Gnutella, Limewire, SoulSeek and WinMX. The actions are being taken in Argentina , Austria, Brazil, Denmark, Finland, France, Germany, Hong Kong, Iceland, Ireland, Italy, Mexico, Netherlands, Poland, Portugal, Singapore and Switzerland. John Kennedy, chairman and chief executive of IFPI, said: “Consumers today can get music legally in ways that were unimaginable just a few years ago, with over three million tracks available on nearly 400 sites worldwide as well as an array of mobile platforms.  Yet some people continue to consume their music illegally, refusing to respect the creative work of artists, songwriters and record producers. “As a result we reluctantly continue with our legal actions and today sees the latest escalation of that campaign to show that file-sharing copyrighted music does carry real legal risks - apart from the risks to privacy and the risks from spyware and viruses.  Around the world many people have already paid a heavy price for their illegal file-sharing.  They all thought they were unlikely to be caught, but teachers, postal workers, IT managers, scientists and people in a host of other occupations, as well as parents, have ended up having to dig deeply into their pockets.  The money they have had to pay as a result of the court cases could have been spent on other things.

The IFPI has also stepped up its efforts in education, working with the music sector alliance www.pro-music.org  to assist the education work around online music by children’s charity Childnet International. Childnet’s educational leaflet “Young People, Music and the Internet” has been rolled out in 15 countries and 11 languages, with the latest versions in Mexico, Brazil and Poland.  Recent research from Lingnan University in Hong Kong has shown that the education campaign there has had a major impact on children and their parents.  More than a third of parents (36%) have guided their children to refrain from illegal downloading in the last year and 67 per cent of people said that legal action is an effective way of reducing illegal p2p file-sharing.

Source www.ifpi.org  

See also Swedishcourt imposes $2,700 (£1,450) fine for illegal file swapping http://www.chron.com/disp/story.mpl/ap/fn/4269228.html

---------------------------------------------------------------------------------------------------------------

COPYRIGHT
Internet
Google snaps up Youtube for $1.65 billion
As Video-sharing Web site YouTube Inc announced that it had struck content deals with Universal Music Group, Sony BMG Music Entertainment and CBS, Google announced, after several days of rumours, that it would buy YouTube for $1.65 billion. Google say the two companies will, for the time being at least, continue to operate independently - but Google also added that it had also directly dealt with Sony BMG and Warner Music for Google music video content. Vivendi's Universal Music Group said on Monday it had agreed to give YouTube viewers access to thousands of music videos. The company said it and its artists will be compensated not just for the official videos, but also for user-generated content that incorporates Universal's music. Universal Music Group said it will also use technology to filter out copyrighted content not authorized to appear on the YouTube site. Sony BMG has it will make video content available on YouTube - and will also let YouTube users include some catalogue songs in their own amateur video uploads. Warner Music had already said it had an agreement with the site. Sony BMG said it will share advertising revenue with YouTube for all music videos that incorporate audio or video works from the Sony BMG library. So three out of four of the majors seem to have adopted a new business model for online video content - just EMI needs to say what it wants to do. But what of the smaller fish – those who own small catalogues but whose work might still be up on YouTube without permission. “I'm sure that the big content providers will all be queuing up to do deals with Google," said Kim Walker, an intellectual property lawyer with Pinsent Masons, the law firm behind the excellent OUT-LAW website. "I guess the smaller operators who perhaps haven't got the negotiating clout that Universal and EMI and so on have got I guess if they can't do a deal or don't do a deal they are going to be more likely to look for recompense in some other way by threatening legal proceedings." Its still a massive task – and administrative jungle - for YouTube if it wants to operate as a legal platform. YouTube does take down material as soon as it is notified of this but the fact remains that a large percentage of the material on the site has been uploaded and is placed there without permission and YouTube had had to delete nearly 30,000 files off its system in one go after The Japanese Society For Rights Of Authors, Composers And Publishers (JASRAC) submitted a document to YouTube listing 29,549 videos that feature music owned by its members which the society say are being hosted illegally. According to an article in the New York Times, SonyBMG, Universal Music Group and Warner Music Group have also all won stakes in YouTube as part of their licensing deals with the video sharing website. The three majors confirmed they had reached an agreement over the distribution of their content on the YouTube platform just ahead of Google's previously reported acquisition of the site.

Universal has also announced launched lawsuits against two video sharing websites accusing them of violating their copyrights. Grouper.com and Bolt.com both offer services similar to that of YouTube, where members can upload their own videos to share with other people. However, just like YouTube, a lot of members actually upload other people's videos, including many pop videos, without the permission of the people who own that content. Bolt already have a notice on the site asking members not to do this stating it respects copyright law. Universal says the actions were brought after they failed to agree licensing terms with these two sites.

http://www.out-law.com/page-7388

www.ilmc.com (news)

http://news.bbc.co.uk/1/hi/entertainment/6061974.stm

---------------------------------------------------------------------------------------------------------------

COMPETITION
Internet
ARTICLE LINK United States v Google? As it buys YouTube, does Google now have market dominance?
An interesting blog by David Berlind looking at anti-trust issues in the US and pointing out that the question of Google’s ‘market dominance’ is by no means as simple as it might look – and challenges the idea of a ‘Googleopoly’ whilst making some challenging comments on Apple’s iTunes business model.

http://blogs.zdnet.com/BTL/?p=3771

---------------------------------------------------------------------------------------------------------------

COMPETITION
Record labels
Sony and BMG to appeal the annulment of their merger by the European Court
Sony and Bertelsmann have appealed against an annulment of their joint venture that created the world's number two music company. In July, the Court of First Instance annulled the European Commission's decision to approve the venture (see our August Music Law Updates. German media group Bertelsmann said in a statement it and Sony had filed the appeal because "the EU Commission's 2004 decision to clear the Sony BMG recorded music joint venture was correctly decided on both the law and the facts". The appeal process is likely to take about a year. Meanwhile the European Commission will concurrently undertake a renewed review of Sony and
Bertelsmann's original merger proposals (annulment issued by the Court Of First Instance simply overturned the original approval on procedural grounds, it did not actually state whether the merger itself was, in fact, anti-competitive - that is for the Commission to decide anew). Bertelsmann said “parties will be providing current market data and other information requested by the Commission in the next few weeks".

As European officials closely monitor the music industry, it appears that Vivendi is going to restructure the way it buys BMG Music Publishing from Bertlesmann after EC officials expressed concerns regarding the conglomerates existing plans. Universal Music owner Vivendi successfully bid for the publishing company but the finalisation of the deal cannot go ahead until European officials give the takeover the go ahead (such approval is needed given Universal's existing music and music publishing assets). Vivendi has proposed a solution to this problem using what is called the "hell or high water clause". Basically, Vivendi pay the money to a third party, probably a bank, who would pass it on to Bertelsmann. The third party would then actually own BMG Music Publishing, until EC approval is achieved (assuming it is, of course), and then ownership of the company passes to Vivendi. However, EC officials are apparently not very keen on this increasingly used trick. One alternative solution is that Vivendi would pay for the publishing firm, but that Bertelsmann would continue to officially own it, in essence acting as a "custodian" of a company they have actually sold, until regulatory approval is obtained.

---------------------------------------------------------------------------------------------------------------

COMPETITION
Broadcasting
CBS makes peace with Spitzer
US radio major CBS has become the first broadcasting corporation to settle with New York Attorney General Eliot Spitzer in his long running payola investigations where record labels have paid to have their records played on the radio - 'pay for play'. All f the majors have agreed to pay fines and revamp internal rules as a result of their own settlements with Spitzer has since turned his attention to the radio groups.CBS have pledged to introduce more stringent rules regarding the relationships their station managers have with record labels and their promoters, as well as paying $2 million in fines. CBS runs approximately 180 radio stations across the US

---------------------------------------------------------------------------------------------------------------

COPYRIGHT / COMPETITION
Record labels, music publishers
US Copyright Office agitates publishers over statutory licences for ringtones
The US Copyright Office has ruled that ringtones qualify as digital phonorecord deliveries and as a result they fall under compulsory license provisions. Under section 115 of the USCopyright Act, the Copyright Royalty Board can now determine royalty rates for these tones. This means that labels can offer ringtone operators the mater rights and the publishing rights as a single package and labels will be able to avoid lengthy licensing negotiations with publishers. Whilst the Recording Industry Association of America welcomed the news, the National Music Publishers' Association was quick to attack the Copyright Office's decision. It argues that this "represents an unprecedented broadening of the compulsory licence for musical works" and could damage songwriters and copyright owners who were previously able to negotiate licences in the free market but are now subject to government regulation.
http://www.billboard.biz/bb/biz/newsroom/legal_management/article_display.jsp?vnu_content_id=1003255346

---------------------------------------------------------------------------------------------------------------

TRADEMARK
Internet
Court Rules Google's use of trademarks as keywords is non-infringing
A federal judge in New York has just ruled that Google's practice of selling trademarks as keywords that trigger links to particular Web sites other than those of the trademark holders does not constitute infringement because Google does not actually "use" the trademarks within the meaning of the law. This ruling was entered on September 28 by Norman Mordue, the Chief Judge of the United States District Court for the Northern District of New York in the case Rescuecom Corporation v. Google, Inc. Judge Mordue granted a motion by Google and dismissed Rescuecom's complaint which alleged trademark infringement with respect to Google's selling of the trademark "Rescuecom" to Rescuecom's competitors as a keyword that triggers the appearance to the competitors Web sites among the search results of Internet users when they enter "Rescuecom" in the Google Internet search engine. Written by Eric Sinrod of Duane Morris LLP. For more information please see Findlaw.com

---------------------------------------------------------------------------------------------------------------

HEALTH & SAFETY
Live event industry
Public house fined for unlicensed door staff
A Pontypridd licensee has been fined £250 and ordered to pay £761 in costs at the Pontypridd Magistrates Court for using unlicensed doorstaff supplied by a security company. Terri Jenkins, who runs the Angharads public house, was taken to court by Rhondda Cynon Taff County Borough Council after licensing officers found the unlicensed staff working at the pub in July 2005. The staff had been supplied by a security company but under the Licensing Act 2003, licensees commit an offence if fail to prevent unlicensed doorstaff being deployed by a third party to their premises. Rhondda Cynon Taff County Borough Council told the court that Jenkins had not shown due diligence and had failed to ensure that the door supervisors supplied were SIA (Security Industry Authority) licensed.

http://www.morningadvertiser.co.uk/news_detail.aspx?articleid=22602

---------------------------------------------------------------------------------------------------------------

TAXATION
Artists, Live Music Industry
FKP Scorpio Konzertproduction Gmbh v Finanzamt Hamburg-Eimsbüttel ECJ C290-04
In May 2006 Advocate General Leger expressed his opinion in the case of FKP Scorpio Konzertproduktion. Scorpio, a German concert promoter, contracted with a Dutch tour promoter in 1993 for performances by American and European artists in Germany. Scorpio did not pay any German withholding tax and the tax authorities raised a massive tax assessments because of breach of of the German Einkommensteuergesetz (Income Tax Law). The Bundesfinanzhof raised four questions to the ECJ: (1) is it correct that non-residents fall under a withholding tax, and residents not; (2) does the withholding tax at source need to be reduced because of the expenses of the non-residents, because residents only pay tax on their net income after the deduction of expenses;(3) can an exemption provided for in a tax treaty be used without the explicit approval of the domestic tax authority; (4) do the answers to these questions also apply to artists and sportsmen living outside the EU? The Scorpio case attacks the artist tax system more explicitly than the Gerritse case and the German tax authorities have already allowed organisers of performances to postpone the payment of the withholding tax for non-resident artists

AG Leger opined that neither the procedure of deducting tax at source nor the debtor’s liability for tax was an infringement of the right to provide service. The implicit inequality between residents and non-residents was justifiable on the grounds of efficiency of the tax imposition itself. However (and Schumacker [1995] ECR I-'225 and Gerritse 234-01 applied) a refusal to allow the deduction of business expenses was an infringement. However, provided that a full mechanism for the deduction of business expenses is provided (eg with a refund procedure) then the withholding procedure itself is not an infringement of the freedom to provide services. Turning to the third point raised, the AG opined that whilst the requirement to provide a tax exemption treaty was a restriction on non-residents in the provision of services, this was justifiable on the ground of the correct and efficient application of whithholding provisions. Finally AG Leger opined that the nationally of an EU resident provider was not relevant to the rights of the recipient. In summary the AG concluded that, in 1993, the withholding tax obligations and procedures themselves were not an infringement of the freedom to provide services, provided the non-resident taxpayer is provided with mechanisms to deduct business expenditure and enjoy tax treaty provisions in the end. Thus it was the AG’s opinion that the disadvantage of withholding tax is allowable on the grounds of taxation efficiency and the liability of taxation of the recipient was accepted except where this was a liability where an exemption was provided for by way of tax treaty.

However the European Court of First Instance has now held that the taxation of non-resident artistes on gross income and allowing a refunding afterwards was in breach of the EC Treaty provisions. Germany must allow deduction of expenses at the time of performance. The Judgment by the Full Grand Chamber composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and J. Makarczyk, Presidents of Chambers, J.-'P. Puissochet, R. Schintgen, P. Kūris, U. Lõhmus, E. Levits (Rapporteur) and A. Ó Caoimh, Judges gave judgment on the 3 rd October 2006.

The Court held (emphasis added) that Articles 59 and 60 of the EC Treaty which prohibit obstacles which promote the restriction in the freedom to provide services must be interpreted as

not precluding :

1.         national legislation under which a procedure of retention of tax at source is applied to payments made to providers of services not resident in the Member State in which the services are provided, whereas payments made to providers of services resident in that Member State are not subject to such a retention;

- national legislation under which liability is incurred by a recipient of services who has failed to make the retention at source that he was required to make.

2.       Articles 59 and 60 of the EEC Treaty must be interpreted as:

- precluding national legislation which does not allow a recipient of services who is the debtor of the payment made to a non-resident provider of services to deduct, when making the retention of tax at source, the business expenses which that service provider has reported to him and which are directly linked to his activity in the Member State in which the services are provided, whereas a provider of services residing in that State is taxable only on his net income, that is, the income received after deduction of business expense;
- not precluding national legislation under which only the business expenses directly linked to the activity that generated the taxable income in the Member State in which the service is provided, which the service provider established in another Member State has reported to the payment debtor, are deducted in the procedure for retention at source, and expenses that are not directly linked to that economic activity can be taken into account if appropriate in a subsequent refund procedure;
- not precluding a rule that the tax exemption granted under the Convention of 16 June 1959 between the Federal Republic of Germany and the Kingdom of the Netherlands for the avoidance of double taxation in the area of income, capital, and various other taxes and for regulating other tax matters, to a non-resident provider of services who has carried on activity in Germany can be taken into account by the payment debtor in the procedure for retention of tax at source, or in a subsequent procedure for exemption or refund, or in proceedings for liability brought against him,only if a certificate of exemption stating that the conditions laid down to that end by that convention are satisfied is issued by the competent tax authority.

3.       Article 59 of the EEC Treatymust be interpretedas not being applicable in favour of a provider of services who is a national of a non-member country.

ECJ Judgment http://www.bailii.org/eu/cases/EUECJ/2006/C29004.html

AG Legers opinion http://www.pwc.com/Extweb/pwcpublications.nsf/docid/E58DDFA0B61B8EC1802570A0003E3BDF/$file/PwC_2006-013-Newsalert17May2006.pdf 

--------------------------------------------------------------------------------------------------------------- 

TAXATION
Live Event Industry
Centro di Musicologia Walter Stauffer v Finanzamt München für Körperschaften ECJ C386-04
This case concerns an Italian non-commercial foundation which provides education for classical music students. The institution is exempt from the Italian l'imposta sul reddito delle persone giuridiche (Corporation Tax) and comparable German institutions would be exempt from the German Körperschaftssteuergesetz (Corporation Tax Law). The Centro di Musicologia Walter Stauffer had rental income in Germany which was taxed under a of the German KStG but could not make use of the exemption for cultural institutions, because it was not based in Germany. The German Bundesfinanzhof has raised the question to the ECJ, whether this exclusion for non-resident institutions is correct under the EC Treaty as an Italian institution would suffer tax on income whereas as comparable German institution would not.

The European Court of Justice (Third Chamber A. Rosas, President of the Chamber, J. Malenovský, S. von Bahr, A. Borg Barthet and U. Lõhmus (Rapporteur), Judges) decided that the fact that the tax exemption for rental income applies only to charitable foundations that are resident in Germany places charitable foundations resident in other Member States at a disadvantage and may constitute an obstacle to the free movement on capital. Thus in principle the legislation constitutes a prohibited restriction on the free movement of capital. Accordingly, the ECJ decided that the prohibition against restrictions on the free movement of capital precludes a Member State from refusing to grant a non-resident charity a tax exemption solely on the ground that it is not resident in that Member State, whereas resident charities are granted such exemption.  The conclusions are further not dependant on how the tax on the foreign entities is levied (whether by way of withholding or by way of assessment). The ECJ held

Article 73b of the EC Treaty, in conjunction with Article 73d of the EC Treaty, must be interpreted as precluding a Member State which exempts from corporation tax rental income received in its territory by charitable foundations which, in principle, have unlimited tax liability if they are established in that Member State, from refusing to grant the same exemption in respect of similar income to a charitable foundation established under private law solely on the ground that, as it is established in another Member State, that foundation has only limited tax liability in its territory.

For a link to the judgment http://www.bailii.org/eu/cases/EUECJ/2006/C38604.html

---------------------------------------------------------------------------------------------------------------

TAXATION
Live Event Industry
Centro Equestro de Leziria Grande Lda ECJ C345-04
The case of Centro Equestro de Leziria Grande Lda concerns German Einkommensteuergesetz (Income Tax Law) and the very strict application of tax refunds for non-resident artists. The German tax authorities have created the Vereinfachtes Erstattungsverfahren (Simplified Tax Refund Procedure), but only expenses that are directly connected with the performances are taken into account and these expenses need to be more than 50% of the earnings. Applications are only considered when the original invoices are attached. The procedures are somewhat complex and not widely used. The Portugese company Centro Equestro de Leziria Grande wanted to make use of the procedure because it had paid 29% withholding tax on the fees for its 11 horse shows in 1996 in Germany and had calculated post-tour that the total expenses (both direct and indirect) had been higher than the gross earnings. One of the horses had died during the German tour, giving an additional depreciation for the book value of the animal. The German Bundesamt für Finanzen (Tax Office) rejected the application for a full tax refund because the indirect expenses were not accepted. The Bundesfinanzhof raised the question to the ECJ, whether this strict procedure is correct under the EC Treaty, because German resident artists and sportsmen are taxed on their net income, after the dedcution of all their business expenses.

Advocate General Leger opinion was that for a non-resident company, only income and expenses associated with the activity in the State may be considered (those expenses being direct or with a casual economic connection with the activity). The AG also stated that where resident and non-resident companies provided the same services then both should be entitled to the same considerations – thus is all cases proceeds may be reduced by the expenses directly related to the activities in the state (Gerritse 234-01 applied). However the AG pointed out that only expenses directly associated with activities in the State and necessary to the activities may be deducted – and if the activities take place in a number of member states then only a proportionate amount of expenses may be deducted. The AG thus decided that it was not discriminatory to require an economic connection between expenses claimed and the taxable activity but that it was discriminatory if non-residents had to provide a direct connection (whereas residents did not) and in breach of the freedom to provide services. The AG also held that it was discriminatory to insist that expenses can only be deducted by non-residents to when they exceed 50% of the proceeds where there is no such limitation for residents (and resident companies). The latter policy had, in all events, been scrapped by the Bundesamt für Finanzen.

For a link to the case summary see http://www.pwc.com/extweb/pwcpublications.nsf/docid/e58ddfa0b61b8ec1802570a0003e3bdf

---------------------------------------------------------------------------------------------------------------

TAXATION
Arists, Live Music Industry
US tightens up on non-resident taxation
Audience (issue 80, October 2006) reports that the US Internal Revenue Service may ask bands to withhold thirty percent of tax on tour personnel as well as on their own artist earnings. This comes at a time when venues and promoters are being told they may be held liable for taxation if a non-resident artist has not filed a Central Withholding Agreement (CWA). The IRS has published a new guidance, Non-resident alien US income and payroll tax responsibilities which now provides for a direct responsibility to withhold 30% of tax on tour personnel. Whether or not this offends international bi-lateral tax treaties may have to be tested in the US courts but the IRS maintain that without a CWA tour personnel may have a US tax liability and the withholding tax is in place to collect this. Tour personnel could then apply for a tax refund under the US system utilizing relevant double taxation treaties.

Audience (issue 80, October 2006)

---------------------------------------------------------------------------------------------------------------

TAXATION
Live Music Industry
UK opera house wins major tax victory
Despite having a Government that professes to support the creative industries in the UK, the Treasury doesn't seem to have read the script - and have been up to their necks in somewhat over zealous taxation activities. The Court of Appeal has now found that UK Customs & Revenue were completely wrong to strip the Gloucestershire based Longborough Festival Opera of its cultural purposes exemption - from VAT on ticket sales. Why were the Revenue so adamant that the Opera Company should be stripped of its exemption? Well - because it was because founding trustee, Martin Graham , unilaterally agreed to underwrite any losses from staging Wagner's Ring Cycle in 2002 and 2003. This, according to the Revenue, meant that the Company was no longer run 'voluntarily' . To benefit from the exemption the orchestra needed to be managed and administered on a voluntary basis by persons who had no direct or indirect financial interest in its activities. The Revenue said that Mr Graham did have a financial interest - even though he was only prepared to cover losses - and didn’t want a share of any profits. The Court, thankfully, said that the Revenue were wrong. The Times 7th October 2006. 

--------------------------------------------------------------------------------------------------------------- 

TAXATION
Live event industry
Bournemouth Symphony Orchestra v Revenue and Customs Commissioners (2006) EWCA Civ 1281
However, it wasn’t all doom and gloom for the Revenue - in another case they managed to get the Court of Appeal to agree that the Bournemouth Symphony Orchestra should be stripped of its cultural exemption for VAT on ticket sales - because a salaried MD sat on the board of trustees – an a wholly negative and unsatisfactory decision for the cultural and creative industries and indeed the live music industry in the UK. The Court held that as the affairs of orchestra were managed by a managing director who was paid a salary to administer the affairs of the Orchestra and was a member of the Board of Directors: this meant that the orchestra’s business was not managed and administered on a voluntary basis for the purposes of Note 2 to items 1 and 2 inGroup 13 of Schedule 9 to the Value Added Tax Act 1994. Lloyd LJ said that managing director’s remuneration and participation in decision making process of the orchestra made it impossible to say that the management and administration of the orchestra was conducted on an essentially voluntary basis. The Independent 19 October 2006.  

---------------------------------------------------------------------------------------------------------------

TAXATION
Artists, live industry
ARTICLE: Dutch taxation of nonresident artists & athletes to end
by Dick Molenaar, All Arts Tax Advisors
The Dutch government has decided to abolish the taxation of non-resident artistes and sportsmen per 1 January 2007. This radical change attracts special attention, because the Netherlands has the right to levy a source tax from non-resident artistes and sportsmen under 74 of its 78 bilateral tax treaties, in which it follows Art. 17 of the OECD Model closely. But the government believes that the tax revenue from this special group of taxpayers is too low and the administrative burden is too high to justify a source taxation. The Netherlands prefers that only the residence country levies tax from their international performing artistes and sportsmen. This is an important deviation from the recommendation by the OECD in Art. 17 of the Model Treaty, in which the primary taxing right has been allocated to the country of performance.

Earlier change in 2001
In 2001 the Netherlands already changed its taxation from non-resident artistes and sportsmen by allowing the deduction of expenses prior to performances and accepting normal income tax returns after the year. The Netherlands did not want to follow the recommendation of § 10 of the Commentary on Art. 17 OECD Model anymore, in which the OECD allows countries to levy a final source tax from non-resident artistes and sportsmen on a gross basis. Many other countries still use this gross taxation, although at lower tax rates (15% - 30%) than the normal rates. This is especially interesting for EU Member States after the decision of the European Court of Justice in the Arnoud Gerritse case (12 June 2003, C-234/01), in which the court ordered that expenses have to be deductible. Taxation on a gross basis is in breach with the freedom principles of the EC Treaty and EU Member States need to change their legislation. But the Netherlands had taken action already earlier, in 2001, following the examples of the net taxation of artistes and sportsmen in the United Kingdom, the United States, Australia and New Zealand.

Evaluation of the taxing rules in 2004
In 2004 the new Dutch artiste and sportsman tax rules were evaluated. Conclusions were that the administrative burden was high for the artistes and sportsmen, the promoters and the tax administration, and that the tax revenue was low. Per year the average tax revenue was only 6,4 million euros at a total tax revenue in the Netherlands of 100 billion euros, which is less than 0,01% of the total. And when the tax credits for resident artistes and sportsmen, who had been performing abroad, were deducted from these figures, the balance of the tax revenue would even be close to nil. The conclusion that the tax system was complicated with just little tax revenue was also published in Dick Molenaar, “Taxation of International Performing Artistes” (IBFD, Amsterdam, 2006), in which the special artiste tax system in the various countries of the world was studied.

Discussions with arts and sports organization
After discussions with representatives of arts and sports organizations and specialized advisers, the Dutch Minister of Finance has decided to bring an end to the special source taxation of non-resident artistes and sportsmen in the Netherlands per 2007. The country is not obliged to use the taxing right following from Art. 17 of the various bilateral tax treaties. By not using Art. 17 the normal taxing rules as specified in Art. 7 (Companies, Independent work) and Art. 15 (Employees) of the OECD Model Treaty will apply to non-resident artistes and sportsmen in the Netherlands.

Only for artistes and sportsmen from treaty countries
Important is, that the end of the non-resident artiste and sportsman taxation will only apply to artistes and sportsmen living in a country, which has a bilateral tax treaty with the Netherlands. Reason for this is that the Netherlands still wants to counteract tax avoidance schemes with artistes or sportsmen pretending to live in tax havens. An official certificate of fiscal residence will be needed for a tax exemption in the Netherlands, giving the residence country the information that performance income from the Netherlands can be expected in the next income tax return of the artiste or sportsman. The Netherlands has a network of 78 tax treaties, covering most of the countries in the world. For artistes and sportsmen from non-treaty countries the existing source taxation in the Netherlands remains the same as it has been until the year 2006.

Tax exemption method
In 12 of the 78 Dutch bilateral tax treaties double taxation for the performance income which falls under Art. 17 is prevented by means of the tax exemption method. When the Netherlands does not use its taxing right anymore and the residence country would exempt the Dutch performance income, the result would be double non-taxation. To avoid this, the Netherlands will approach these treaty partners in the coming months with the request not to allow tax exemption anymore for Dutch performance income. This may result in a protocol to the treaty. The other 66 Dutch bilateral tax treaties contain the tax credit method, giving the residence country the full taxation in case of absence of Dutch source tax.

Fairer taxation for artistes and sportsmen
The government of the Netherlands believes that their action takes away an obstacle for international performing artistes and sportsmen and leads to fairer taxation. On OECD and EU level the Netherlands will ask other countries to follow this initiative.

© 2006 Dick Molenaar, All Arts Tax Advisers, Rotterdam, the Netherlands Reprinted with permission of the author. First published in abridged form in Tax Notes International, September 11, 2006 at p. 889

http://www.allarts.nl/

The European Live Music Forum have called for an end to withholding and ‘at source’ taxation of artists in Europe – ELMF Board member Hans Hjorth said “The implementation of equal principles of taxation for the cultural sector as for other legitimate trans-national business activities is long overdue. The Dutch initiative indicates that a solution, at least within the framework of the European Union, could be very quickly established". Contact info@elmf.eu for more details.

---------------------------------------------------------------------------------------------------------------

TRADE MARK
Artists
Macca applies for trade mark
Former Beatle Paul McCartney - known to Sun readers as Macca - has applied to register the surname McCartney for use on goods as wide-ranging as pantihose, waistcoats and vegetarian food. The application was made by his company, MPL Communications, and specifies such disparate items as bath robes, articles of fancy dress, overalls, sports clothing and swimwear. The application also covers meat and poultry, products of which the vegetarian celebrity strongly disapproves. A spokesman for McCartney said the inclusion of meat products was purely defensive. "It would give him protection against his name being used on products he does not approve of" he said. Thanks to our friends at the IPKat for this (see link details in the next update).

---------------------------------------------------------------------------------------------------------------

TRADE MARK
Artists
Rooney gets back domain name
England and Manchester United football star Wayne Rooney’s has been successful in his bid to have the waynerooney.com domain name transferred to him. The registrant claimed that he obtained the domain name in 2002, after seeing the then sixteen-year old Rooney playing for Everton, being convinced of his potential, and then being motivated to obtain the domain name to set up a fan site which never eventuated. The Administrative Panel of the WIPO Mediation and Arbitration Centre ordered that the mark be transferred. The domain name was found to be identical or confusingly similar to a trade mark, even though Wayne Rooney only registered his trade mark after the domain name was registered, since trade marks registered after domain names can result in a finding of identical or confusing similarity under the UDRP (though it’s harder to find bad faith where the domain name predates the trade mark). The registrant’s supposed desire to set up a fan site did not give him a legitimate interest because this intention was not particularly believable. The panellist in particular highlights that the registrant had no programming experience at the time of registration and did nothing subsequently in order to acquire such skills. The domain name had been registered or used in bad faith, even though it pre-dated the trade mark registration since, at the time, Rooney had goodwill in the Liverpool areas. A couple of years ago Robbie Williams was also successful in getting back robbiewilliams.com from another registrant - here the site was rather amusingly being used to house photographs of the band 'Oasis' who at the time had fallen out with the Robster.
See  http://ipkitten.blogspot.com/2006/10/rooney-domain-name-offside.html

--------------------------------------------------------------------------------------------------------------- 

DEFAMATION
Television, radio, magazines, internet
ARTICLE : Jameel - a victory for responsible journalism
by Catherine Fehler, solicitor, Michael Simkins LLP
On 11 October 2006 the House of Lords, in a landmark ruling, unanimously overturned the decision of the High Court and Court of Appeal and allowed the defence of the Wall Street Journal Europe; effectively upholding the public interest defence in libel actions.  The decision represents an affirmation of the House of Lords' decision in Reynolds v. Times NewspapersLimited in 2001 which was hailed as a victory for freedom of speech and investigative journalism, however until now had not provided a clear public interest protection from claims in libel. The offending article was published in the Wall Street Journal Europe and claimed that the Saudi Arabian authorities were monitoring bank accounts of prominent Saudis for evidence of supporting terrorism, knowingly or not, at the behest of the US Government.

The article included the Abdul Latif Jameel Group as being on the list of monitored accounts.  The main company in that group,  and it's president Mohammed Jameel,  sued for libel. The lower courts had allowed Jameel's claim to succeed, taking a narrow interpretation of the Reynolds privilege defence.  But the Lords held that the Nicholls list in the Reynolds case, of 10 matters which journalists could consider in deciding whether the reporting was responsible, was not a hurdle to establishing the defence, but rather guidance as to what matters would be considered in deciding whether a journalist had acted reasonably.  The Lords stressed that a "flexible and practical" approach should be taken in assessing whether the Reynolds privilege is made out in any case. This decision greatly enhances the position for responsible investigative journalism on matters of public importance. The Lords also held that corporate claimants do not have to prove financial loss to maintain a libel claim; a restatement of the present position.

This update is © Michael Simkins LLP. 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.co.uk/default.aspx

---------------------------------------------------------------------------------------------------------------

© 2006, Ben Challis