Copyright Licensing Ltd v The University of Auckland and Others

• Jurisdiction: New Zealand
• Judge: Miller J
• Judgment Date: 20 April 2015
• Neutral Citation: [2015] NZCA 123
• Docket Number: CA543/2014
• Court: Court of Appeal
• Date: 20 April 2015

Between

Copyright Licensing Limited

Appellant

and

The University of Auckland, The University of Waikato, Massey University, Victoria University of Wellington, Lincoln University, The University of Canterbury, The University of otago and the Auckland University of Technology

Respondents

[2015] NZCA 123

Court:

Randerson, White and Miller JJ

CA543/2014

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court (HC) decision on the interpretation of licensing schemes under the Copyright Act 1994 (the CA) — a copyright collective acted as a licensing body in respect of books, journals, newspapers and magazines — respondents were the eight universities — appellant proposed to alter licensing arrangement to a single class of licence, to be offered on the same terms to all eligible licensees — s2 CA defined a licensing scheme as a scheme setting out the “classes of cases” in which the scheme's operator was willing to grant copyright licences and the terms of those licences — HC held that a scheme must contain more than one class of cases — respondents cross-appealed as to whether Audio-Visual Copyright Society Ltd v University of Auckland (AVCOS) stated the law correctly in limiting the Copyright Tribunals powers to vary a scheme under s149 CA (Reference of proposed licensing scheme to Tribunal) by not permitting it to deal with the terms of individual licences — whether a licensing scheme had to have more than one class — whether the Tribunal could not deal with the terms of individual licenses when addressing a scheme under s149 CA.

Counsel:

A H Brown QC and JRE Wach for Appellant

R J Katz QC for Respondents

A The appeal is allowed.

B The cross-appeal is dismissed.

C Costs will lie where they fall.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Miller J)

Table of Contents

Introduction	[1]
The legislative scheme	[9]
The proposed scheme	[24]
The Tribunal decision	[29]
The High Court decision	[35]
The appeal and cross-appeal	[39]
The intervener	[42]
Mootness	[47]
“Licensing scheme”	[52]
The cross—appeal	[60]
Decision	[74]

Introduction

1 The Copyright Act 1994 distinguishes for regulatory purposes between licensing schemes and licences offered otherwise than under such schemes. It defines a licensing scheme as a scheme setting out the “classes of cases” in which the scheme's operator is willing to grant copyright licences and the terms of those licences. 1 The question of construction before us is whether a scheme may comprise a single class of licence, to be offered on the same terms to all eligible licensees, or must comprise more than one class each offering different terms.

2 Copyright Licensing Ltd (CLL) is a copyright collective which acts as a licensing body for New Zealand authors and publishers of books, journals, newspapers and magazines. It also represents overseas owners under reciprocal agreements with reprographic rights organisations in other jurisdictions. Among other things, it licenses for use in student course materials the reprographic copying (that is, by photocopying or scanning) and digital distribution of extracts from material held in hard copy format.

3 The respondents are the eight New Zealand universities. Over many years they have collectively negotiated licences with CLL under which each university paid the same fee per equivalent fulltime student (EFTS) in exchange for the right to copy works for course materials. All involved have treated this arrangement as a licensing scheme.

4 In 2012 CLL wanted to increase the fee from $20 to $26 per EFTS with an annual CPI adjustment. The universities found that unacceptable. They pointed to declining demand, the result of digital media supplanting photocopied materials. Before us, Mr Katz QC explained that the universities' complaint is that the scheme requires the universities to cross-subsidise one another; that is so because each pays the same per student fee but the amount of copying they do varies. 2

5 Negotiations having reached an impasse, CLL forced the issue by filing a reference in the Copyright Tribunal under s 149(1) of the Act, seeking to have its proposed scheme declared reasonable and approved accordingly.

6 The universities responded with an interlocutory application seeking a declaration that what CLL proposes is not a licensing scheme but rather a licence or set of licences. If that were correct, the licences could not be approved collectively under s 149: should it seek approval, CLL would have to apply under s 157, under which the Tribunal considers the terms of individual licences. The universities were motivated by concern about limits upon the Tribunal's power to vary a scheme under s 149. They point to this Court's decision in Audio-Visual Copyright Society Ltd v University of Auckland (“ AVCOS”), in which it was said that when addressing a scheme the Tribunal cannot “deal with the terms of individual licences.” 3

7 The Tribunal dismissed the universities' application, holding that what CLL had proposed was a scheme for the purposes of the Act. 4 The decision was reversed on appeal, Fogarty J holding that a scheme must contain more than one class of cases. 5

8 CLL now brings this further appeal. 6 It is supported by an intervener, Recorded Music Ltd, which is a collective offering single-class licensing schemes.

The universities have brought a cross-appeal in which we are asked to determine whether AVCOS correctly states the law.

The legislative scheme

9 Copyright is a property right attaching to, among other things, literary, dramatic, musical and artistic works. 7 The Act confers upon a work's owner the exclusive right to do certain things – notably, copying – in relation to the work. 8

10 Creative works may be enjoyed by many users, in one way or another, without diminishing them, 9 and they are susceptible to unauthorised copying. For these reasons, owners need effective licensing mechanisms if they are to take advantage of the monopoly that the law confers upon them. However, licensing confronts high transactions costs, meaning the costs of finding potential licensees, negotiating terms, recovering payment and policing compliance with licence terms. Transactions costs may preclude exploitation entirely, particularly where the work has a low value to individual licensees.

11 Copyright collectives developed to overcome these problems. They play an important role, particularly in markets for mass secondary use of copyrighted material, of which reprographic copying of published material held in libraries is a good example. 10 Collectives take advantage of scale economies in copyright administration, allowing owners to license their rights efficiently and offering users ready access to copyright works. They do so, notably, by licensing an entire catalogue of works at a uniform price, so avoiding the costs of negotiating content and price on a licensee-by-licensee basis.

12 Licensing bodies – meaning an owner or owner's agent, such as a collective 11 – may choose to set standard terms on which they are willing to grant licences to a

class of user. The Act recognises this practice by providing for copyright schemes. It also provides for licences offered otherwise than pursuant to a scheme. So, for example, CLL could have chosen to negotiate licences separately with each university

13 Markets for copyright administration may exhibit natural monopoly characteristics, the result of high transactions costs and scale economies. 12 This phenomenon encourages large collectives, which may acquire significant market power vis-à-vis both owners and users. Market power can be exploited not only by setting high prices but also by refusing unreasonably to discriminate among licensees on price or content. 13 Some licensees may respond by organising themselves into a collective and insisting upon bilateral negotiations, as the universities have done in New Zealand. 14

14 The Act recognises that the monopoly conferred upon licensing bodies may be misused. It seeks to prevent misuse and balance the interests of owners and licensees by conferring jurisdiction upon the Tribunal to vary, where it is reasonable in the circumstances to do so, the terms of a scheme, or licence, that a licensing body has chosen to offer.

15 The Act regulates licensing schemes in sections 148 – 155. It defines a licensing scheme as follows:

2 Interpretation

(1) In this Act, unless the context otherwise requires,—

licensing scheme means a scheme setting out—

• (a) the classes of cases in which the operator of the scheme, or the person on whose behalf the operator acts, is willing to grant copyright licences; and

• (b) the terms on which copyright licences would be granted in those classes of cases;—

  and for the purpose of this definition a scheme includes anything in the nature of a scheme, whether described as a scheme or as a tariff or by any other name.

16 Section 148 catalogues those licensing schemes to which the Tribunal's powers under s 149 apply:

148 Licensing schemes to which sections 149 to 155 apply

Sections 149 to 155 apply to—

• (a) licensing schemes that—

  • (i) are operated by licensing bodies; and

  • (ii) relate to copyright in literary, dramatic, musical, or artistic works, or films, or film soundtracks when accompanying a film; and

  • (iii) cover works of more than 1 author; and

  • (iv) relate to licences for copying the work or performing, showing, or playing the work in public or communicating the work to the public:

• (b) all licensing schemes in relation to copyright in sound recordings (other than film soundtracks when accompanying a film), communication works, or the typographical arrangement of published editions:

• (c) all licensing schemes that—

  • (i) relate to copyright in computer programs, sound recordings, or films; and

  • ...