Article: THE DOCTRINE OF RESTRAINT OF TRADE
Articles / March 2003

Click here to download this article as a PDF file (.pdf) The Doctrine of Restraint of Trade in Relation to Music Industry Agreements Andrew Evans MA, Solicitor March 2003 In this article Andrew looks at the decisions of the UK courts which have, over the last thirty years, developed a body of law under the doctrine of restraint of trade which will, in certain circumstances, allow artists to ask courts to hold their excusive recording contracts and exclusive music publishing contracts unenforceablewhere the provisions of such contracts are unreasonable. All covenants in restraint of trade are prima facie unenforceable at common law and are enforceable only if they are reasonable with reference to the interests of the parties concerned and of the public. Unless the unreasonable part can be severed by the removal of either part or the whole of the covenant in question, its inclusion renders the covenant or the entire contract unenforceable. With the case of Nordenfelt v Nordenfelt, it was decided as a matter of policy that although general restraints were prima facie void, such restraints may be considered valid provided that the party alleging its validity could prove it reasonable as between the parties and in the…

WILL THE VICTORY FOR THE RIAA IN ITS CASE AGAINST VERIZON OPEN THE FLOODGATES FOR LEGAL ACTIONS AGAINST CABLE COMPANIES AND ISPs?
USA

COPYRIGHT Record Labels, Music Publishers, Internet The legal battle between the Recording Industry Association of America (RIAA) and Verizon Communications over the pursuit of alleged internet music pirates could have a major impact on cable operators, telecom companies and internet service providers. If the RIAA wins the case, record labels and music publishers wielding broad federal subpoena power could force operators to divulge the names of high-speed data subscribers each time one is suspected of breaking a copyright. RIAA also want operators with high-speed data operations to pay copyright use fees into a new industry-wide ISP pool. The RIAA has proposed that the fund should compensate music companies for the copyright violations which they can’t track down. The case places the right to fair remuneration for use of copyright in direct conflict with individuals right to privacy, and further, would put an obligation on ISPs to take responsibility for subscribers unauthorised copyright infringements. The cable industry is carefully watching the case. The case also highlights the conflicts within major media conglomerates – AOL Time Warner owns two major ISPs, cable channels and of course a major record label and major music publishing house. The legal action arose when Verizon refused…

ROD STEWART FACES “MAGGIE MAY” ACTION FROM MANDOLIN PLAYER
UK

COPYRIGHT Record Labels, Music Publishers A folk musician says he is to take legal action against Rod Stewart over his contribution to the 1970s hit song “Maggie May”. Ray Jackson, a member of folk/rock band Lindisfarne, says he was paid just in 1971 for his contribution of a distinctive mandolin section in the recording. Mr Jackson believes he may have lost at least because he was not credited for the track’s distinctive “hook”. Mr Jackson is basing his claim on the Court of Appeal ruling that held that session musician Bobby Valentino should be recognised for his part in writing the distinctive violin riff on the Bluebells’ 1983 hit and subsequent 1993 number one hit “Young At Heart”. Stewart’s defence is that Jackson was engaged on a ‘work for hire’ basis and that all and any copyright which might have subsisted in the mandolin recording was assigned to Stewart absolutely and the was ‘full and final settlement’ for his services and any contribution. It is accepted that Mr Jackson had played on the song but not that he had any part in writing it. Stewart’s argument is that the recording and song were from the inception of their creation “the…

BERT WEEDON WINS LIBEL BATTLE WITH BBC
Artists , Defamation / March 2003
UK

DEFAMATION Artists Guitar legend Bert Weedon has won damages from the BBC over a false claim that he “learned to play the guitar whilst a convict.” His appearance in the libel case was a first time in court for the 82-year-old despite allegations to the contrary in the Daily Mail where a radio preview wrongly included Bert with musicians who had spent spells in prison. The Radio Choice review for Jailhouse Rock incorrectly stated that “even gentle guitar guru Bert Weedon” is among the many popular music figures who has spent time in prison. Mr Weedon said: “A friend phoned me up and said ‘have you read the radio review in the Daily Mail?’. “I have never been in prison. I am known in show business as “Mr Clean”. I have never taken drugs, I have never drunk heavily and I have never been involved in any scandal.” The Daily Mail said the report was based on a BBC press release and the broadcasting company apologised for the “distress and embarrassment” caused. Mr Weedon’s solicitor, Simon Smith said: “It may not always be fashionable in the rock music world but my client is rightly proud of his unblemished past and does not…

CD PIRACY IN SOUTH AMERICA ESCALATES
USA

COPYRIGHT Record Labels, Music Publishers CD pirates and street vendors in Ecuador are decimating the legitimate music industry as copied CDs featuring tropical salsa, hard rock and even Christmas carols are retailing for just $1 each – a price even the citizens of this poverty-stricken nation can afford (the minimum wage is just $138 a month). More worryingly for record labels and music publishers is the statistic that pirates sold an estimated 13 million compact discs in 2002 – compared to just 650,000 sold legitimately. The pirates are now exporting copied CDs, and pirate CDs made in Ecuador have been found in Peru and Columbia. Ecuador is a prime spot for all types of pirated goods. Weak police intervention compounds the problem. As the pirating industry grows, local shops suffer. Just 80 record stores are still in business in Ecuador, compared with 300 shops four years ago. Even with the US dollar adopted as currency, two of the ‘big five’ majors (BMG and EMI) have left Ecuador after they were unable to compete with counterfeiters. Sony Music Entertainment and Universal still operate in Ecuador. See www.mercurynews.com

MISLEADING WEBSITE DIVERTED BUSINESS FROM ENDSLEIGH INSURANCE
Internet , Trade Mark / March 2003
UK

TRADEMARK Internet, Merchandising A website name used by Campus Insurance Services diverted customers intending to buy policies from Endsleigh Insurance to Campus’s own sales pages. Campus registered the names www.ensleigh.com and www.ensleigh.co.uk hoping web users would misspell the word ‘Endsleigh’. It is believed that a large number of students did this and Campus have been ordered to produce details of the number of students diverted from their ‘Ensleigh’ pages to their main site who then bought home contents insurance. The Court held that Campus had infringed Endsleigh’s trademark in a deliberate attempt to fool customers into buying more expensive cover from Campus. Damages will be assessed at a later stage. See www.thetimesonline.co.uk/yourmoney

NAPSTER: BMG FACES LAWSUIT
Germany

COPYRIGHT Record Labels, Music Publishers The parent company of ‘major’ record label BMG are the latest recipient of a lawsuit in the Napster saga. The German media giant Bertelsmann has received a $17 billion lawsuit from a group of songwriters, composers and music publishers alleging that by funding the file swapping service BMG had been involved in the widespread infringement of copyrighted music works and had deprived the claimants of millions of dollars of revenues. Bertlesmann invested in Napster in the hope of turning Napster into a subscription service. Bertlesmann argue that their investment is only a loan and deny any legal liability. Ironically Bertlesmann owns a major publishing catalogue through BMG which would benefit from any successful action. See www.newsvote.bbc.co.uk

AOL LAUNCHES SUBSCRIPTION INTERNET SERVICE
Copyright , Record Labels / March 2003
USA

COPYRIGHT Record Labels AOL’s 27 million subscribers will be offered legitimate access to record company catalogues from $3.95 (0) per month. Subscribers will be given access to the 250,000 strong recording catalogue of download service MusicNet, one of the music industry’s answers to the hugely popular but unauthorised sites like Aimster, KazaA and Morpheus. The New York Times has welcomed the move as the strongest attempt yet to beat unauthorised downloading of music. The music industry has blamed internet piracy for contributing to a slump in CD sales, with sales dropping 9% in the US in 2002. But legal sites from the industry have so far struggled to persuade fans to use legitimate (paid for) services – MusicNet has 500,000 subscribers, compared with 100 million users of the free song-swapping services. The basic AOL $3.95 deal will give users 20 streamed songs and 20 downloads per month. Fans can sign up for more access for up to $17.95 (40) per month, which buys unlimited streams and downloads, and the ability to burn – or copy – 10 songs to blank CDs per month. AOL Director of Music Evan Harrison said “A music subscription service is not going to make sense…

GRAND JURY BEGINS ITS INVESTIGATION INTO THE STATION NIGHTCLUB TRAGEDY
Health & Safety , Live Events / March 2003
USA

HEALTH & SAFETY Live Concert Industry The Grand Jury began its investigation on February 26th behind closed doors at a National Guard training center in East Greenwich to decide whether anyone should be held responsible for the fire and the deaths of 97 people in West Warwick, Rhode Island. Most of the first Grand Jury session was devoted to preliminary talks between prosecutors and lawyers for the rock band Great White whose guitarist, Ty Longley, died in the blaze. The investigation will centre on the causes of the fire, Great White’s pyrotechnic display, the layout and construction of the nightclub and the use of inflammable soundproofing materials. There is also a dispute over whether Great White had permission to use pyrotechnics. The band has said it received approval to use special effects, but the two brothers who own the club have denied that they gave permission. Club owners Jeffrey and Michael Derderian, along with band members, could be indicted on state charges of involuntary manslaughter or second-degree murder. It appears that the brothers who own the club were about to sell the business and the Derderians were scheduled to begin transferring the liquor license the day after the disaster. See…

“INTELLECTUAL PROPERTY IS THEFT. IDEAS ARE FOR SHARING”
Copyright , Internet / March 2003
Japan
Netherlands
UK
USA

COPYRIGHT Internet Columnist John Naughton used this headline in his February 09 column in the UK’s Sunday Observer newspaper advancing the argument that in the USA industry associations such as the RIAA (Recording Industries Association of America) and the MPAA (Motion Picture Association of America) have used politics and clever rhetoric to develop the concept of ‘intellectual property’ and to portray internet file swopping as ‘theft’ of this property. Naughton says that, in his view, the industry associations’ aim is to ‘signify the moral equivalent between sharing a track from a CD with a friend and stealing your neighbour’s goods and handing them round’. Naughton goes on to point out that the new draft EU copyright directive (see Law Updates, February 2003) will impose criminal sanctions on large scale (e.g., for profit) piracy but not on individual file sharing and copying. See www.briefhistory.com/footnotes. The industry campaigning continues and the RIAA and MPAA have just published a brochure warning companies of the risk of internet piracy and work place related copyright infringement. See www.zdnet.com.au. COMMENT:Most legal systems recognise that granting ownership of copyright and other intellectual property rights provides economic stimuli for those who create, invent and design for a living and provides protection against…

OWNER OF SAMPLED SONG WINS COURT INJUNCTION
USA

COPYRIGHT Record Labels, Music Publishing, Artists Indian composer Bappi Lahiri has won a court injunction halting the sale of Dr. Dre protéguth Hurts’ debut album and single based on claims that the hit song, “Addictive,” sampled more than four minutes of one of his compositions, without credit. A federal judge in Los Angeles ruled that “Addictive” must be removed from shelves unless the composer Bappi Lahiri’s name is added to the credits. Lahiri filed suit against Dre, his Aftermath Records label, and parent company Interscope/Universal Music Group, citing uncredited use of the Hindi song “Thoda Resham Lagta Hai,” composed by Lahiri for the 1987 Indian film “Jhoothi.” Lahiri is seeking compensatory damages in excess of $1 million as a result of the failure to give credit and the loss of his ability to properly promote his music in the United States. The figure represents a combination of the profits Lahiri’s attorneys said the sales of Truth Hurts’ music has reaped for Universal along with the losses suffered by their client. The album has sold in excess of 300,000 units. Universal had the choice of pulling all product from the shelves or affixing a sticker with Lahiri’s credit on copies of…

UK PUB PAYS HEFTY PRICE FOR BREACHING PUBLIC ENTERTAINMENT LICENCE
Licensing , Live Events / March 2003
UK

LICENSING Live Concert Industry Pub licensee Peter Elton was fined 00 with 00 costs by Bromley Magistrates Court for two admitted breaches of the Pub’s Public Entertainment Licence. Mr Elton admitted to allowing entertainment to continue for 45 minutes past the licenced curfew at the Alexander Pub in Penge on the Kent Borders in England. The licence conditions had been imposed to prevent disturbance to residential neighbours of the Alexander. See www.newshopper.co.uk

DOORS DRUMMER TAKES ACTION AGAINST NEW ‘DOORS’
Artists , Copyright , Trade Mark / March 2003
UK

TRADE MARK, COPYRIGHT Artists, Merchandising A reunion concert featuring two original members of the Doors has prompted a law suit from original drummer John Densmore in the Los Angeles Superior Court for breach of contract and unfair competition. Original keyboardist Ray Manzarek and guitarist Robby Krieger have teamed up with vocalist Ian Astbury (formerly of the Cult) and Stuart Copeland, drummer with the Police, to play a concert in Los Angeles. Densmore claims that the band’s name is owned as a partnership by the three living members and the late Jim Morrison’s wife, Pamela Courson and that each partner has a right of veto over use of the name. He claims that the ‘new’ Doors are misusing the band’s name and logo and will confuse the general public. Recent cases in the UK involving the use of original band names have included Sweet and Bucks Fizz. Seewww.news24.com/News24/Backpage COMMENT : This area of law has recently been explored in the UK by the High Court in the case of Byford -v- Oliver and Dawson (2003). This case involved the use of the name ‘Saxon’ by Biff Byford, the original singer with the British heavy metal band. Byford had been a band member since its formation in the late 1970s….

INTERNET PATENT VIOLATIONS ALLEGED
Internet , Patents / March 2003
Mexico
USA

PATENTS Internet Acacia Media Technologies have asserted ownership of a number of patents which govern the process of transmitting compressed audio or video online, one of the most basic multimedia technologies on the Net. Acacia have just signed up its latest licensee, Mexican satellite telecommunication company Grupo Pegaso. Radio Free Virgin, the online music division of Richard Branson’s Virgin Corporation, said it agreed to license the technology late last year after a careful legal review. A number of basic Web technologies and practices have been subject to patent claims over the past year. Telecommunications giant SBC Communications is claiming rights to Web site “frames” and another company says it has rights to the e-commerce site staple known as the shopping cart. Acacia Media Technologies is part of a larger corporation called Acacia Research which holds intellectual property in several areas. One of its subsidiaries owns technology used in the television content-blocking V-Chip and last year alone earned close to $25 million in royalties from that side of the business. According to the Company, their patents could affect virtually anyone involved in the business of providing on-demand digital audio or video, from software companies to network service providers to the actual…

CATHERINE ZETA-JONES AND MICHAEL DOUGLAS BEGIN ACTION AGAINST HELLO!
Artists , Privacy / March 2003
UK

PRIVACY LAWS Artists The action brought by Michael Douglas and Catherine Zeta Jones reached the High Court in London. The couple and Northern & Shell, publishers of OK, have brought an action against Hello! claiming that their privacy was invaded when a photographer secretly took pictures of their New York wedding and provided these to Hello! who then published the shots. The couple had an exclusive agreement with OK to publish official photos. The UK has no real body of privacy law and recent cases by celebrities such as Naomi Campbell (against Mirror Group Newspapers) and footballer Gary Flitcroft (A -v- B & C [2002]) have done little to develop the right to privacy set out in the Human Rights Act 1998 with the Court of Appeal giving a very wide definition to what the ‘public interest’ might be. Mr Justice Lindsay must have further alarmed the couple by stating in court that in the UK weddings must, by their very nature, be ‘public’ events as part of the ceremony involves asking members of the public if they know of any just reason why a marriage ceremony should not take place.

UK MUSICIANS’ UNION SPEARHEADS CHALLENGE TO PROPOSED LICENSING LEGISLATION
Licensing , Live Events / March 2003
UK

LICENSING Live Concert Industry Organisers of live music in small venues, currently exempt from needing a Public Entertainment Licence (PEL) and ‘pub’ venues where two or less performers are featured (known as the ‘two in a bar’ rule) are becoming increasingly alarmed at the hidden costs and bureaucracy emerging from the UK Government’s proposed Licensing Bill. Audience magazine noted that ‘far from deregulation or a boost to the industry, the legislation is likely to devastate the sector of live music where many aspiring performers take their first steps and others enjoy a modest living’ (www.audience.com). The initial plan of scrapping PELs and including a entertainment licence free with a venue’s liquor licence initially seemed positive – not now, as both the live music industry and the licensed pub trade are becoming increasingly concerned. The plan to move liquor licensing from Magistrates Courts to local authorities is now opposed by the licensed trade and the live music industry is also alarmed that the new levels of local authority bureaucracy and increased costs will spell the end of small pub and club venues.

JAPANESE COURT ORDER ENSURES THAT CLIENTS OF ONLINE KARAOKE SUPPLIES MUST PAY ROYALTIES
Japan

COPYRIGHT Music Publishing, Internet The Daily Yomiuri Online reports that the Osaka District Court have ordered an online karaoke machine leasing firm in Osaka to take necessary measures to prevent its customers, who have not paid copyright fees for music to the Japanese Society for Rights of Authors, Composers and Publishers (JASRAC), from using music delivered online. The Court’s ruling held that Hit One had been assisting its customers to infringe copyrights. The verdict is a precedent for a number of forthcoming lawsuits of a similar nature in Japan and means that music distributors who do not take an active role in violating the law can, and will, be asked to take remedial measures to prevent infringements by users. According to the Daily Yomiuri Online, Hit One leased karaoke machines and distributed music online to bars and restaurants in the Osaka and Hyogo prefectures. About 97 percent of the songs distributed by the firm were reportedly controlled by JASRAC. However, Hit One knowingly delivered music to a number of its customers who had not paid copyright royalties to JASRAC. Presiding judge Kazuo Komatsu said in his ruling, “The firm was responsible for confirming that its customers already closed a deal…

2003 GLASTONBURY FESTIVAL PUBLIC ENTERTAINMENT LICENCE GRANTED
Licensing , Live Events / March 2003
UK

LICENSING Live Concert Industry After a meeting lasting until 00.30 the Regulatory Board of Mendip District Council finally granted the licence for the 2003 Glastonbury Festival. This was the festival’s second application having initially been refused a licence because of the Council’s worries about safety and security of local residents and the policing of local villages outside of the Festival site itself. After the seven hour meeting on the 17th February, Festival co-organiser Emily Eavis said ‘I am so excited but it was like going through a really painful paper shredder’. See www.glastonburyfestivals.co.uk