Consideration of the Power Issue
120 For the reasons that follow, we respectfully consider that the Tribunal erred in concluding that it had power to vary the licence scheme as proposed by PPCA to incorporate non-PPCA rights.
121 The relevant jurisdiction of the Tribunal is provided for in Part VI of the Act. Aspects of this Part were the subject of amendments introduced by the Copyright Amendment Act 2006 (Cth) (2006 amendments). As the Explanatory Memorandum to the Copyright Amendment Bill 2006 (Explanatory Memorandum) notes (at page 3), many of the changes implement the Government's response to the report entitled Jurisdiction and Procedures of the Copyright Tribunal prepared by the Copyright Law Review Committee dated December 2000.
122 Section 154 of the Act is entitled "Reference of proposed licence schemes to Tribunal" and s 154(1) provides that where a licensor proposes to bring a licence scheme into operation, he or she may refer the scheme to the Tribunal. Subsection 154(2) provides that the parties to a reference in s 154 are (a) the licensor referring the scheme; (b) such persons (if any) as apply to the Tribunal to be made parties and are made parties by the Tribunal in accordance with s 154(3) (which, in turn, provides that such persons applying to be made parties must have a substantial interest in the operation of the scheme); and (c) the Australian Competition and Consumer Commission, if the Tribunal makes the Commission a party to the reference under s 157B.
123 The definitions of "licence", "licensor" and "licence scheme" adopt some significance in the present debate. They appear in s 136(1), as set out in [117] above.
124 The definition of "licence" was introduced in the 2006 amendments. The Explanatory Memorandum states that the purpose of the amendment is to change the range of licences that can be the subject of an application to the Tribunal and goes on to say that "subject to having regard to the new definition of 'licensor', the new definition covers a licence to do any act comprised in the copyright in any work or other subject-matter": Explanatory Memorandum p 174, item 1.
125 The earlier definition of "licensor" was repealed and replaced with the definition set out in [117] above. The Explanatory Memorandum indicates that the purpose of the amendment is to limit the licences and licence schemes that can be the subject of an application or reference to the Copyright Tribunal to those that are collectively administered. Accordingly, a licensor must be able to grant licences for a substantial number of copyright works or other subject matter in a class of such materials, for example, literary works or musical works or sound recordings which were made by various different creators. The licensor may have that authority as owner of the relevant copyrights, as exclusive licensee or as agent for the owners: p 174 item 2. As we have noted earlier, in the present case the licensor is PPCA.
126 The definition of "licence scheme" remains unaltered by the 2006 amendments.
127 A "licence scheme" is a scheme formulated by a licensor (a collecting body). It is to be recalled that a licence scheme is not of itself a copyright licence. It is a scheme that provides for the grant of a licence. The grant of rights arises when someone seeks a licence under the scheme and is granted one. According to the definition such a scheme must have three characteristics as follows.
128 First, it must set out the "classes of cases" which the licensor or persons on whose behalf the licensor acts (broadly, the copyright owners) are "willing" to grant licences. The words "classes of cases" refer, in our view, to such of the incidents of copyright that the owner gives permission to the collecting society to licence. This is apparent because the "licence" concerns (and is defined to be) that which is granted by the owner in a work or other subject matter to do an act comprised in the copyright. The use of the words "classes of cases" serves to leave open the precise incidents of copyright that the copyright owner might choose to authorise the collecting society to license in the scheme.
129 For instance, in the present case the scheme proposed by PPCA concerns copyright in sound recordings. The rights of copyright owners in this respect are set out in s 85(1) of the Act and involve the exclusive right to all or any of the following "acts": (a) to make a copy of the sound recording; (b) to cause the recording to be heard in public; (c) to communicate the recording to the public; and (d) to enter into a commercial rental arrangement in respect of the recording. The use of "classes of cases" instead of classes of "acts" in the definition of a licence scheme indicates a more refined subdivision of the particular aspects of the copyright that may be licensed than the broader class of "acts" such as those nominated in s 85(1). In this regard, it is to be recalled that copyright is personal property that is transmissible by assignment, by will and by devolution by operation of law: s 196(1). An assignment of copyright may be limited in any way, including so as to apply to one or more of the classes of acts that, by virtue of the Act, the owner of the copyright has the exclusive right to do (including a class of acts that is not separately specified in the Act as being comprised in the copyright but falls within a class of acts that is so specified): s 196(2)(a). An assignment may also be limited to a place or part of Australia (s 196(2)(b)) or so as to apply for part of the period for which the copyright subsists: s 196(2)(c).
130 Similarly, such aspects of copyright may, in part or in whole, be the subject of either exclusive or non-exclusive licences granted in respect of some or all of those aspects of copyright, or parts thereof.
131 Section 137, which is entitled "Cases to which licence schemes apply" provides as follows:
(1) For the purposes of this Part, a case shall, subject to the next succeeding subsection, be deemed to be a case to which a licence scheme applies if, in accordance with a licence scheme for the time being in operation, a licence would be granted in that case.
(2) For the purposes of this Part, where, in accordance with a licence scheme:
(a) the licences that would be granted would be subject to conditions by virtue of which particular matters would be excepted from the licences; and
(b) a case relates to one or more matters falling within such an exception;
that case shall be deemed not to be a case to which the scheme applies.
132 The section identifies that a "case" is one to which a licence scheme applies if, in accordance with a licence scheme for the time being in operation, a licence would be granted in that case (s 137(1)), unless the licences that would be granted would be subject to conditions by which particular matters would be excepted from the licences, in which case the case is deemed not to be one to which the scheme applies (s 137(2)). In this way the potential overlap between a "condition" and a "case" is identified. A "case" concerns the licence of the whole or a part of the copyright. A condition will be any term that does not concern the scope of the rights granted. Instances include terms going to the provision of warranties, the mechanics of the payment regime, dispute resolution terms, and choice of law terms.
133 Reference is made to a class of cases in several other parts of the Act. For instance, in s 155 provision is made for reference of an existing licence scheme to the Tribunal where a dispute arises between the licensor and either an organization claiming to be representative of persons requiring licences "in cases included in a class of case to which the scheme applies" or any person claiming to require a licence in such a case. Similar provision is made in s 156(1). In both the reference to a "class of case" is to any aspect of the copyright in respect of which a licence is required.
134 The distinction between "case" or "cases", "charges" and "conditions" is also reflected in the language of s 159. Subsection 159(1) provides that where an order with respect to a licence scheme is in force and a person "in a case" to which it applies does anything that, apart from that section, would be an infringement of copyright but would not be an infringement if he or she were a holder of a licence under that scheme, "in so far as the scheme relates to cases to which the order applies" that person shall have a defence to infringement proceedings if he or she has "complied with the relevant requirements". The relevant requirements are identified in subsection 159(2) as being (a) compliance with the conditions that would be applicable to the licence "in respect of the case concerned" and (b) payment of any charges in respect of the licence.
135 Accordingly, in our view the definition of "licence scheme" identifies as a first characteristic of the scheme that it be formulated by a licensor and set out the aspects of the incidents of copyright in respect of which the licensor or licensors (or the persons on whose behalf they act) are willing to grant licences.
136 The second characteristic is that it must set out the charges (if any) subject to the payment of which licences would be granted in those classes of cases.
137 The third characteristic is that the scheme must set out the conditions subject to which licences would be granted. Section 136(2)(a) provides that a reference to conditions is a reference to any conditions other than conditions relating to the payment of a charge. As we have noted, s 137 deems that a case is not the subject of the licence if a condition provides that it is exempted from it.
138 The jurisdiction of the Tribunal arises where a licensor proposes to bring a licence scheme into operation and it refers that scheme to the Tribunal: s 154(1). Subsection 154(4) provides that the Tribunal shall consider "a scheme referred under this section". That reference to "scheme" is to the "licence scheme" identified under subsection 154(1) having the three characteristics identified in the definition in s 136(1). Having regard to the context in which the reference to "scheme" appears, we are unable to accept the submission advanced by Foxtel that "scheme" should be regarded as having a different meaning. Our view is reinforced by the interchangeable references to "scheme" and "licence scheme" that appear in subsections 154(5)-(7). It is also apparent from the language of s 159(1), which refers to the consequences arising "[w]here an order made on a reference under this Part with respect to a licence scheme is for the time being in force". This is plainly a reference to the defined term.
139 The Tribunal is by s 154(4) empowered to make such order, confirming or varying the scheme or substituting for the scheme another scheme proposed by one of the parties, as the Tribunal considers reasonable in the circumstances.
140 The applicant contends that the scope of the Tribunal's power is constrained by the scope of the authority conferred on the licensor (that is, the collecting society) by the copyright owner. Where the input agreement between the copyright owners grants no licence to the collecting society in respect of an aspect of the copyright, the Tribunal has no power to add it to the referred scheme or in any substituted scheme. Foxtel submits that the Tribunal does have such power, subject only to the constraint that any variation or substitution be reasonable in the circumstances.
141 In our view, the reference to "scheme" in s 154(4) is to be understood consistently throughout the subsection to be a "licence scheme" as defined. Whilst the referred scheme may be varied or substituted, the end result approved by the Tribunal must still be a "scheme" that has the three characteristics that we have identified. Central to the first of these is the requirement that the classes of cases the subject of the licence be ones that the licensor (collecting society) or person on whose behalf the licensor acts (broadly, the owner of copyright) is willing to grant. The reference to "willing" in this context is to be understood to mean that those persons are prepared to offer for licence those particular aspects, or "classes of cases", of the copyright the subject of the scheme. Taken together these matters indicate that the classes of cases in which the licensor or the person on whose behalf the licensor is willing to grant licences will be parts of the copyright interest of the owners that are offered by the collecting society in the licence scheme referred to the Tribunal (as may be varied by licensor from time to time).
142 The second and third characteristics, being the charges and conditions to be applied, do not contain reference to the willingness or otherwise of the licensor or person on whose behalf the licensor acts. Accordingly, a scheme as determined by the Tribunal that includes conditions and charges that conflict with proposals made by these people will remain within the definition of a licence scheme and be within the power of the Tribunal, provided that it is reasonable in the circumstances.
143 In our view this approach is consistent with the policy and purpose of Part VI of the Act, which is to confer on the Tribunal power to supervise the relationship between collecting societies and persons in need of licences. The starting point mandated by s 154(1) is the voluntary offer of a licence scheme by the licensor on behalf of its members. It is not a scheme for the compulsory license of rights, which are addressed in other provisions of the Act. Indeed, the absence of the prescriptive provisions applicable to compulsory licensing provides a further indication that this is the correct approach.
144 PPCA contends that it was not "willing" to grant licences in respect of the non-PPCA rights and also that its input agreement with the copyright owners whom it represents had not granted it a licence in respect of those rights. As a result, it submits that those owners were also not willing to grant licences for those classes of cases and, furthermore, PPCA was not able to do so. To some extent the reference to the input agreements distracts from the real point, which turns on the "willingness" or otherwise of the parties mentioned to grant the licence in respect of the classes of cases identified. That is to be ascertained from the form of licence scheme proposed by the licensor, which represents the interests of the copyright owners and accordingly may be taken to reflect the "willingness" of both.
145 The consequence of our construction is that the Tribunal does not have power to vary the scheme proposed by a licensor insofar as it affects the classes of cases in respect of which the licence is proposed to be granted. In our view this does not lead to an absurd or unworkable result (as Foxtel contends). Subdivision H (ss 154-159) of Division 3 of Part VI of the Act concerns the regulated approval of licence schemes volunteered by rights owners. These licence schemes are to be contrasted with the grant of statutory licences under the Act, where statutory mechanisms provide for the compulsory licence of certain acts within the copyright of an owner, subject to certain provisos. An example of the latter is s 108 of the Act, which provides a defence to copyright infringement in a sound recording performed in public on terms requiring, inter alia, the payment to the copyright owner of equitable remuneration the amount of which is to be determined by the Tribunal if the parties are unable to agree. Under s 154 of the Act a degree of decisional freedom is given to the Tribunal to impose reasonable charges and conditions on the licensor, but not to expand the cases in respect of which the copyright licence is to be granted. To do so would permit the Tribunal to impose a compulsory licence upon the rights owners in circumstances where the Act indicates that this is not its intention.
146 Foxtel submits that the approach taken in Universities UK Ltd v Copyright Licensing Agency Ltd, Design and Artists Copyright Society Ltd Intervening [2002] EMLR 35 (Universities UK), where the United Kingdom Copyright Tribunal (Christopher Floyd QC, Evelyn Cribb and Angela Howorth) considered a question of the jurisdiction of that Tribunal under the Copyright, Designs and Patents Act 1988 (UK) (UK Act) should be adopted. Section 116 of the UK Act relevantly provides that a "licensing scheme" means a scheme setting out (a) the classes of case in which the operator of the scheme, or the person on whose behalf he acts, is willing to grant copyright licences, and (b) the terms on which the licences would be granted in those classes of case. Section 118(1) provides that the terms of a licensing scheme proposed to be operated by a licensing body may be referred to the Tribunal "either generally or in relation to any description of case" and s 118(3) relevantly provides that the Tribunal shall consider the matter referred and:
… make such order, either confirming or varying the proposed scheme, either generally or so far as it relates to cases of the description to which the reference refers, as the Tribunal may determine to be reasonable in the circumstances.
147 The collecting society submitted that the Tribunal had no jurisdiction to compel the inclusion within a licence scheme that it approved a licence to copy material (here, certain "course packs") that was not part of the input agreement with the collecting society and so not within the repertoire of its rights. The Tribunal rejected that submission, finding that once the licence scheme had been properly referred to it, the Tribunal had jurisdiction to consider what restrictions were reasonable in the circumstances (at [59]). The Tribunal said (at [65]):
But the exercise by the Tribunal of its jurisdiction cannot occur before the owner of the rights has voluntarily decided to participate in a licensing scheme. … [M]ost of the Tribunal's work consists of imposing terms on parties who have been unable to agree. Where the Tribunal awards more favourable terms to the licensee than were on offer, those terms are imposed. But that does not mean that the Tribunal is creating a compulsory licensing scheme: the rights holder is always free to withdraw from the scheme.
148 Foxtel submits that this approach should be adopted in the present case. However, a number of factual and legislative differences indicate that it would be unsafe to apply this reasoning in the present case. First, the non-PPCA rights are not rights in respect of which the owner of the rights has voluntarily decided to participate. To the contrary, they do not appear in the input agreements and have not formed part of the licence scheme referred by PPCA to the Tribunal. Secondly, under the Act, the rights holder is not always free to withdraw from the scheme. Subsection 154(6) provides a limited right for the licensor (collecting society) to withdraw the reference at any time before the Tribunal makes an order, but that right is not conferred on the copyright owners. Further, the copyright owner is not automatically a party to the reference to the Tribunal. The Tribunal has discretion to grant leave for an owner to appear if he or she "has a substantial interest in the operation of the scheme to which the reference relates": s 154(3). Thirdly, under the licence scheme approved by the Tribunal in the present case, clause 4 provides for the removal of sound recordings from the repertoire licensed under the scheme by licensors of PPCA, but the power to remove is limited to the rights granted by PPCA under clause 2 of the agreement. It would not, therefore, apply to the non-PPCA rights that have been included by the Tribunal.
149 Foxtel submits that the non-PPCA rights described in cl 2.2(a)(i)-(iii) of the scheme made by the Tribunal are simply contested aspects of three categories of New Media Rights. It submits that the legal character of the controversial aspects of these rights is that they restrict the right to communicate PPCA sound recordings to the public but they do not describe acts comprised in the copyright as expressed in s 85 of the Act, nor are they substantive classes of conduct in their own right. Rather, they relax certain restrictions sought to be placed on such rights, and therefore address incidental conditions or characteristics of the New Media Rights that PPCA otherwise has the right to license and that were put before the Tribunal for determination in the reference. As such, it submits that the scheme as varied by the Tribunal is "referable to and built around the "classes of cases" put forward by PPCA, being those particular classes of cases within the right to communicate sound recordings referred to as "Audiovisual Streaming Rights", "Digital Content Rental Rights" and "On-demand Offering Rights". For the reasons given, we do not agree that the "cases" identified in the definition of "licence scheme" are to be equated with "acts" comprised in the copyright as identified in s 85 of the Act. They may, depending on the licence scheme, include much narrower incidents of the rights conferred on a copyright owner.
150 Taking as an example the first of the three rights the subject of contention, in the case of "Audiovisual Streaming Rights", PPCA proposed at 1.1(f):
Audiovisual Streaming Rights means the rights to Communicate Cleared PPCA Sound Recordings reproduced in Audiovisual Content and Enhanced Content (excluding for the avoidance of doubt Music Videos and radio programs) to the public over the Internet, a mobile telecommunications network or any other communications network now known or developed in the future, including by means of an interactive on demand service or linear channels where there is no copy of the Audiovisual Content (other than a temporary copy), or any other form of fixed file or data from which the user can subsequently re-play the Audiovisual Content, which is created on the user's playback Device [fn Subject to Input Agreement (IA) amendment].
(emphasis added)
151 Foxtel submits that the practical effect of this is that the scheme would permit a user to stream and watch (and listen) as it came onto his or her device. It does not permit the user to stream it, delay and watch it later. It is a timing issue.
152 The Tribunal's final version replaced the italicised words with:
… where there is no copy made by the Subscription Television Service of the Audio Visual Content other than a temporary copy for technical reasons but where the user can, instead of viewing the Audiovisual Content, store it instead for later viewing on a one-off basis.
153 This version permitted streaming, storage and watching later. Foxtel submits that the change is in the character of an adjustment to the conditions on which the audiovisual streaming rights are conferred. It alters the effect of the qualification, but makes no alteration in substance so far as the consumer is concerned, or so far as Foxtel is concerned about any further or other use of the sound recording. The applicant submits that under the scheme as varied the "right" (or class of case) has a completely different character. In PPCA version audiovisual streaming was a right to stream content that a user could watch immediately but not store and retain. Under the approved scheme, the user is granted the right to retain, for any length of time, the content that is provided. It is no longer a streaming right but a right to download and store.
154 We accept the submissions advanced by the applicant. The alteration in the terms of the Audiovisual Streaming Rights does not serve to impose a condition or a charge, but to alter the cases in respect of which a licensee may use the copyright work. PPCA proposal did not confer a right to download and store. It may be inferred that the rights owners were not willing to do so.
155 The changes to the Digital Content Rental Rights and On-demand Offering Rights are to similar effect. In each case, the licence scheme proposed by PPCA curtailed the use of those rights, with the result that had a person used the rights in a manner inconsistent with the scheme, he or she would not have benefited from the protection under s 159(1) of the Act. The changes made by the Tribunal were not to conditions, but to classes of cases in respect of which the licensor was not willing to grant a licence.
156 We accept that this conclusion has the consequence that the role of the Tribunal is to some extent more limited than under the approach it adopted in the present case. However, the Tribunal remains free to adjust charges where it considers that any constraint on the licence offered by the licensor relevantly diminishes the value of the scheme offered. In our view this is the approach that the legislative scheme intended.
157 It is not necessary for us to address in further detail each of the non-PPCA rights. We have found that a licence scheme that is the subject of the determination of the Tribunal must possess the characteristics of a defined licence scheme, including that the classes of cases be those that the relevant persons are willing to grant. Neither PPCA nor the copyright owners whom they represented were willing to grant licences in respect of the non-PPCA rights. As the example of the modification of the audiovisual streaming rights demonstrates, each of the non-PPCA rights is a class of case to which the scheme applied, it representing a basis upon which the copyright owner permits an aspect of the copyright in its work to be reproduced. For the reasons given, the Tribunal did not have power to propose a scheme that is not in respect of classes of cases that the licensor is willing to license.
158 Accordingly, we find that the Tribunal did not have jurisdiction to make an order varying the licence scheme so as to include the non-PPCA rights.