Some good news and some bad news for copyright owners

On 28 March 2012 the High Court handed down a copyright case in which the plaintiffs – including Sony Music, Warner Music, EMI Music and Universal Music – sought to immunise their copyright from the 1% cap on royalties imposed by the Copyright Tribunal’s compulsory licensing scheme.

In Phonographic Performance Company of Australia Limited v Commonwealth [2012] HCA 8, the High Court found that all copyright existing before the Copyright Act 1968 (Cth) (“the 1968 Act”) is subject to the 1968 Act, and that provisions limiting the amount of compensation the Copyright Tribunal can grant a party whose

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copyright is being licensed without its consent are applicable, no matter when the copyright originated.

While this was bad news for the copyright owners who brought the case, there was some silver lining. Justices Crennan and Kiefel, in a joint judgment, made a strong statement that in ordinary circumstances copyright attracts the protection of s 51(xxxi) of the Commonwealth Constitution, meaning that copyright cannot be acquired by the Commonwealth without “just terms”.

Background

The plaintiffs held copyright over sound recordings produced before 1969. This material was protected by copyright under 1911 and 1912 legislation. Under that legislation, it was a breach of copyright to broadcast a copyright sound recording without the consent of the owner.

Conversely, under the 1968 Act the Copyright Tribunal can grant a broadcaster a license over a sound recording without the consent of the owner. The 1968 Act allows the Tribunal to set a price the broadcaster must pay for a license, but the legislation provides for maximum limits on how much a broadcaster is required to pay. In the case of a commercial broadcaster, the Tribunal cannot require them to pay more than 1% of their revenue for the time for which they have a license to broadcast a song. For public broadcasters, the maximum amount payable to a copyright owner is half of a cent multiplied by the population of Australia.

The plaintiffs argued that because their copyright existed before the 1968 Act, the Commonwealth government could not “acquire” it through the compulsory licensing scheme without “just terms” (in accordance with s 51(xxxi) of the Constitution). In this scenario, they argued that the cap on payments by broadcasters was unjust and that greater compensation was needed.

The plaintiffs faced one problem, though. They did not want to rely on their copyright as it existed before 1968 because it was subject to a 50 year, rather than 70 year, limit. Instead, they wanted to argue that their pre-1968 copyright continued to exist under the 1968 Act.

What did the Court say?

The Court found that the 1968 Act abolished all previous copyright and established a new statutory scheme. As such, the only copyright held by the plaintiffs was the copyright bestowed upon them under the 1968 Act, which came with the limitations posed by the compulsory licensing scheme. As the 1968 Act created new rights, rather than taking away pre-existing rights, the Commonwealth did not need to pay compensation

The bad news came with some good news, though. Crennan and Kiefel JJ dealt with an argument that frequently appears in intellectual property constitutional cases: that intellectual property rights, as “creatures of statute” are inherently susceptible to change and not subject to the constitutional right to compensation when acquired by the Commonwealth. Their Honours found (at [96]) that “recurrent legislative balancing of the competing interests of copyright owners and the public does not support absolute propositions such as that copyright is an inherently unstable right, or that reductions in the exclusive rights to do acts within a copyright are always permissible adjustments under s 51(xviii) of the Constitution which do not attract the guarantee under s 51(xxxi)”.

The judgment of Crennan and Kiefel JJ is a small piece of good news for copyright owners, furthering a body of law which suggests that intellectual property rights may be subject to a constitutional protection requiring compensation to be paid when rights are acquired.

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