Copyright licensing 02: the Copyright Tribunal’s powers to grant licence terms, and its effect on your licence strategy

We’ve already examined the Copyright Tribunal’s role, the three key stages in Isentia’s application to the Copyright Tribunal which culminated in the Tribunal’s final determination delivered in October 2021, and how these proceedings provide important lessons for the conduct of future proceedings in this jurisdiction.

In this second article, we’ll examine the lessons on the Tribunal’s power to order licence terms, and the importance of a clear strategic approach in copyright licence negotiations. Important guidance arises from the Full Federal Court’s decision in Copyright Agency Limited v Isentia Pty Ltd [2022] FCAFC 163, which was Copyright Agency’s application for judicial review of the Tribunal’s final determination in the Isentia proceeding.

The Isentia proceedings: a quick recap

Isentia is a media monitoring organisation which requires a licence from Copyright Agency to copy and communicate certain print and digital news content for the purpose of providing media monitoring services to its customers.

In 2018, following Copyright Agency’s development of a proposed new industry licence model, Isentia commenced proceedings in the Copyright Tribunal alleging that Copyright Agency’s proposed licence was unreasonable. Isentia also proposed its own licence terms and requested that the Tribunal order that Isentia be granted a licence in the terms proposed by it, or alternatively, orders specifying the terms and conditions that the Tribunal considers reasonable in the circumstances.

In October 2021, the Copyright Tribunal delivered its final determination in Application by Isentia Pty Limited [2021] ACopyT 2 ordering that Isentia be granted a licence on the terms proposed by it with very limited modification.

Copyright Agency applied to the Full Federal Court for judicial review of the Tribunal’s final determination. Publishers News Corp and Nine Entertainment also applied to intervene in the proceedings given their interest as publishers of copyright works which they had authorised Copyright Agency to license to media monitoring organisations (via a joint venture entity called CopyCo Pty Ltd).

The Full Court dismissed both Copyright Agency’s application and News’ and Nine’s application to intervene.

The Copyright Tribunal’s power to order licence terms and conditions

In its reasons for judgment, the Full Court held that the Tribunal’s findings were reasonable and provided several definitive statements which clarify the boundaries of the Tribunal’s power to order licence terms.

Two key issues were:

1. whether the Tribunal could order a licence which included terms and conditions that Copyright Agency claimed were not within its “mandate” to license to media monitoring organisations. For example, where a copyright owner had only authorised Copyright Agency to licence rights to use copyright works on specified and limited terms, for example, the payment of a certain fee or on the condition that the copyright owner could withdraw its works from the licence; and
2. whether the Tribunal had power to order terms and conditions which placed obligations on the licensor, and not only the licensee.

In addressing each of those issues the Full Court held that:

• if an applicant’s case under section 157 is well founded (ie. the licensor has refused or failed to grant a licence or procure the grant of a licence on reasonable terms), then the Tribunal is empowered to grant a licence subject to charges and conditions that the Tribunal (and not the collecting society) considers reasonable and it is not constrained by the charges and conditions which the owners/members of the collecting society had required that collecting society to impose on any licence granted. That is, if a copyright owner chooses to permit a collecting society to grant a licence for doing an act comprised in the copyright of a work, every limitation on that right is a condition that the Tribunal is entitled to evaluate for reasonableness; and
• the Tribunal’s power extends to stipulating terms and conditions requiring either or both of the licensor and the licensee to perform certain obligations.

Intervening when a collecting society is also involved

In dismissing News Corp and Nine Entertainment’s joint application to intervene, the Full Court noted “there is an important issue of principle and precedent in play” and held:

• everything that News Corp and Nine Entertainment submitted could and should have been put by CAL given that it represents the interest of its members and other rights holders which included News Corp and Nine Entertainment;
• when persons or entities become members of a collecting society, they grant rights to that collecting society because they perceive an advantage in collective representation. One such benefit of collective representation is that it is the licensor and not the member who is the necessary party to any Tribunal proceeding and therefore subject to the Tribunal’s jurisdiction;
• a member who does not like the result of a Tribunal proceeding should not expect to be able to intervene in any appeal merely because it does not like the result or would like to have its own representation in any judicial review challenge. In this case, News Corp and Nine Entertainment did not seek to raise any ground of challenge different from those raised by CAL. Rather, they merely made some differently worded submissions about the same grounds. Further, “any notion that it is appropriate for a member of a licensor and the licensor to split their submissions in a challenge to the Tribunal’s orders to ensure the submissions are different must be firmly rejected”.

Key strategic considerations for copyright licensing

Together, the Tribunal’s and the Full Court’s decisions are important authorities on the scope of the Tribunal’s power to order licence terms and they have set an important precedent for the conduct of the Copyright Tribunal proceedings. They also highlight a number of key matters that should be carefully considered when developing a strategy for copyright licensing negotiations. Those include:

• Interim licence: If the licence arrangements between the parties have or will shortly be expiring, a party may apply to the Tribunal for an interim licence which can be different from historic licence arrangements that were previously in place between the parties.
• Position between competitors: Due to the nature of licences subject to the Tribunal’s jurisdiction, it is often the case that the licensing arrangements in issue apply to competitors in the same industry, particularly where a licence scheme has been referred to the Tribunal. While recognising the necessity to comply with the competition law, with appropriate care, it is possible for competitors individually to seek the same or similar licence terms or via an authorised industry body.
• Methodology for calculating licence fees: Consistent with the Tribunal’s decision in Copyright Agency Limited v University of Adelaide [2022] ACopyT 2, the Isentia decisions, emphasise that it will not be sufficient for the parties merely to rely on previous agreements as a benchmark or comparable bargain to underpin the quantum of licence fees payable, even where those licence fees were agreed between the parties. Rather, the Tribunal will need to understand the methodology underpinning any proposed licence fee and be satisfied that it accounts for any market power that may have operated at the time the historic licence fee was determined. Because it is always difficult to apply traditional valuation methodologies to intangible intellectual property such as copyright, the parties must give careful thought to a suitable methodology and the evidence required to support the reasonableness of any proposed licence fee.
• Scope of the Tribunal’s power: Given the Full Court’s findings in relation to the Tribunal’s power, when commencing any Copyright Tribunal proceedings, licensees should consider whether to seek a broader set of rights than they would otherwise be able to obtain from a licensor based on the mandate given to them by their members. That said, it is important to bear in mind that the onus will be on the party proposing any terms to establish that it would be reasonable for the Tribunal to grant those licence terms in the circumstances.
• Referral or application to the Tribunal? Or both?: The Full Federal Court decision in the Isentia proceedings is not the only appellate decision on the power of the Tribunal to order licence terms – this was also considered by the Full Federal Court in Phonographic Performance Company of Australia Limited v Copyright Tribunal of Australia [2019] FCAFC 95. That matter concerned the Tribunal’s power in relation to a referral to the Tribunal by PPCA of a licence scheme under section 154 of the Copyright Act. The Isentia decision considered the Tribunal’s powers on an application by a licensee under section 157 of the Copyright Act. There is some uncertainty regarding the difference, if any, between the Tribunal’s power to order licence terms in matters involving referrals of licence schemes under section 154 or 155 on the one hand, and applications to the Tribunal under section 157 on the other. Parties considering Tribunal proceedings should consider any strategic advantage of one course over the other, including making an application even if there is an existing referral. Given the decision in the Isentia proceedings, a rise in applications to the Copyright Tribunal by licensees is possible, seeking terms and conditions which collecting society licensors claim they cannot grant due to limitations on their “mandate”.

If you would like assistance in relation to your copyright licensing arrangements, please contact a member of the Clayton Utz intellectual property team.

Clayton Utz (team led by partner Tim Webb) acted for the lead media monitoring organisation, Isentia, in both the Copyright Tribunal proceedings and the application for judicial review in the Full Federal Court.