COPYRIGHT TRIBUNAL OF AUSTRALIA Universal Music Australia v EMI Music Publishing Australia Pty Ltd [2000] ACopyT 3 COPYRIGHT TRIBUNAL – practice and procedure – application to be made party – substantial interest – discretion – matters to be taken into account Copyright Act 1968 (Cth) s 152A(6) and s 152B(5) UNIVERSAL MUSIC AUSTRALIA and Others v EMI MUSIC PUBLISHING AUSTRALIA PTY LTD and Others CT 2 of 1999 FINKELSTEIN DP SYDNEY 14 MARCH 2000 IN THE COPYRIGHT TRIBUNAL CT 2 of 1999 BETWEEN: UNIVERSAL MUSIC AUSTRALIA and Ors Applicants AND: EMI MUSIC PUBLISHING AUSTRALIA PTY LTD and Ors Respondents TRIBUNAL: FINKELSTEIN DP PLACE: SYDNEY DATE: 14 MARCH 2000 THE TRIBUNAL ORDERS: 1. The application to be made a party to the proceedings be stood over. IN THE COPYRIGHT TRIBUNAL CT 2 of 1999 BETWEEN: UNIVERSAL MUSIC AUSTRALIA and Ors Applicants AND: EMI MUSIC PUBLISHING AUSTRALIA PTY LTD and Ors Respondents TRIBUNAL: FINKELSTEIN DP PLACE: SYDNEY DATE: 14 MARCH 2000 RULING FINKELSTEIN DP 1 There is before the Tribunal an application for an order determining the amount of royalty payable by the manufacturers of sound recordings of musical works to the owners of those works and the manner in which that royalty is to be paid. 2 The parties to the application are 82 sound recording manufacturers as applicants and 266 publishing companies as respondents. Two representative organisations are also parties to the application, Australian Record Industry Association Ltd (ARIA), representing the interests of the manufacturers, and the Australasian Mechanical Copyright Owners Society Ltd (AMCOS), representing the interests of the publishers. For practical purposes the proceeding before the Tribunal will be conducted by the representative organisations on behalf of their members. The manufacturers and copyright owners will take little active part. Proceedings before the Tribunal would be unmanageable were it not for the recognition given by the Copyright Act 1968 (Cth) to representative bodies such as ARIA and AMCOS. 3 IMF (Australia) Ltd (IMF) seeks to be made a party to the application. It is also a representative organisation whose 110 members are managers of approximately 200 songwriters, composers and recording artists. According to an affidavit filed by Mr R White, IMF is considered to be the central representative body for artist managers in the contemporary music industry in Australia. 4 The Tribunal has power to make a person a party to the application. The source of the power is to be found in s 152A(6) and s 152B(5) of the Copyright Act which subsections are in identical terms and provide: "Where an organisation (whether claiming to represent manufacturers or the owners of copyrights in musical works or not) or a person (whether a manufacturer or the owner of the copyright in a musical work or not) applies to the Tribunal to be made a party to an application under this section, the Tribunal may, if it thinks fit, make that organisation or person a party to the application if the Tribunal is satisfied that the organisation or person has a substantial interest in the application." 5 There are three points to note about these subsections. First, the Tribunal has power to join as a party someone who is not, and does not represent, a record manufacturer or an owner of copyright. Hence it is not necessary for an applicant for joinder to show that it has, or those that it represents have, a legal interest in the outcome of the application. In the language of the old law on standing, the person seeking to be joined need not be "a person aggrieved" by the proceeding. 6 At the same time, and this is the second point, the person seeking to be made a party to the application cannot be a "stranger" or "busybody", to borrow yet again from the discourse of the law relating to standing. The person or organisation wishing to be joined must have "a substantial interest in the application". This necessarily involves some examination of the facts and circumstances of the particular application before the Tribunal. 7 The final point to note is that even where an applicant for joinder is able to demonstrate "a substantial interest in the application", the Tribunal retains a discretion whether to order joinder. This is hardly surprising. The Copyright Act provides that the parties to an application such as this, are the record manufacturer(s) and the copyright owner(s), presumably whether or not they are named as parties. Accordingly, those with an immediate interest in the outcome of the application will be before the Tribunal and bound by its orders. It is right, therefore, that any other person or organisation that wishes to be made a party should be subject to the Tribunal's discretion even having established "a substantial interest". 8 Heretofore the royalty paid by manufacturers has been a percentage of the manufacturer's list price or "published price to dealer" (PPD), as the list price is referred to in the music industry. The manufacturers seek a change to this method of calculating royalty by substituting for the list price the actual selling price or actual realised price (ARP) obtained on the sale of sound recordings. Unless there is a corresponding change to the percentage of the price on which the royalty is calculated, this will result in an immediate reduction in the income of copyright owners, reflecting the widespread discounting from the list price that occurs in the market. 9 IMF says that it has a substantial interest in the application for two, or perhaps three, reasons. First, a manager's fee is usually expressed as a percentage of the earnings of the artist, most of whom are songwriters. As publishing income is reduced, so is the artist's income and this results in a corresponding reduction in the earnings of the artist's manager. Hence the outcome of the application will directly affect the earnings of managers and that, so it is said, is a "substantial interest in the application". 10 Secondly, it is put that a manager's responsibility includes an obligation to ensure that the artist receives the greatest possible return from the assignment to a publishing company of the artist's copyright in musical works. Being made a party to, and advancing the interests of the artist in this application is one method by which this obligation will be discharged. 11 Whether a person or an organisation has a substantial interest in an application before the Tribunal seems to be a mixed question of fact and law. In determining the sufficiency of an applicant's interest it is necessary to consider the matter to which the application relates. In other respects it is no doubt a matter of degree having regard to all of the circumstances of the case, although it must always be borne in mind that the interest should be "substantial". I take this to mean that the interest must be something that is real and of substance and not merely minimal or transitory. 12 It is necessary to note in this connection that an artist usually assigns to a publisher his or her copyright in musical works. As a result the artist does not receive a royalty directly from the manufacturer, the royalty is paid to the publisher who has taken the assignment of copyright. It is often the case, however, that the consideration for the assignment of copyright is a percentage of the royalty received by the manufacturer. 13 I should mention also that one purpose for the IMF application is so that it can be represented at the interlocutory hearing, which begins today, where the Tribunal will be asked to put in place an interim arrangement for the payment of royalties pending the final resolution of the application. The interim arrangement sought by the manufacturers is a reflection of what they seek by way of final relief. 14 For present purposes I am prepared to accept, although with some hesitation, that IMF has sufficient interest to satisfy the requirement that it has a substantial interest in the application. In particular, I am prepared to proceed on the basis that a manager has a leading role to play in negotiating the terms upon which his or her artist will assign copyright to a publishing house and that the manager's ability to achieve the best possible result for the artist is heavily dependent upon the royalty the publishing house will receive from a manufacturer. I treat as less significant the financial interest that the manager has in the royalty, although that interest cannot be ignored altogether. It is also important to remember that not all artists are represented by publishers: a small number act independently and may only have a manager to look after their interests. 15 The issue, as I see it, is whether the discretion to join IMF should be exercised in its favour. In my opinion IMF should not, at this stage, be made a party to the application for the following reasons: (1) There is nothing to suggest that the interest of the artists will not be adequately represented by the publishers who are nothing, if not antagonistic, towards the proposed change from PPD to ARP. Importantly, it is unlikely that IMF will make submissions (it does not propose to lead evidence) on the interim application that will differ in any significant respect from those that will be put on behalf of the publishers by their representative organisation, AMCOS. This is an important point. If I were of the opinion that, for one reason or another, AMCOS might not put all that could be said against the relief sought by the manufacturers, I would be very tempted to make IMF a party to the application to ensure that the Tribunal has available to it all relevant points of view. Indeed, in that event IMF would have a compelling case to be made a party. But when, as here, I suspect that IMF has nothing of substance to add to the case that will be put at this time, no useful purpose will be achieved in making it a party. (2) The financial interest of the managers, to the extent that this is relevant, will also be protected adequately by the publishers. The publishers' interest in securing the greatest possible return by way of royalty is no less than the interest of the managers and is more immediate. (3) To join IMF at this stage may disrupt the interim hearing. The Tribunal has set aside three days to hear the matter. At the request of the parties the Tribunal is constituted by three members. If the hearing is not completed within the time allocated it will not be possible to reconvene the Tribunal for some time. This may cause significant prejudice to the parties. 16 That being said, I cannot deny the possibility that arguments may be put by IMF which will be useful to the Tribunal. It may place a perspective on issues different from that which the parties offer. Accordingly, if time is available, I will allow IMF the opportunity to make submissions, provided I am persuaded that IMF has something to add to the submissions to be put by AMCOS. IMF will be permitted to follow this course without being made a party. 17 In the meantime, I will stand over its application to be made a party. Before I accede to that application I wish to hear submissions on the Tribunal's power to impose terms which will protect the parties from the costs and other burdens which will result from joinder. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Decision herein of the Copyright Tribunal constituted by Finkelstein DP Associate to the Deputy President: Dated: 5 April 2000 Counsel for the Applicants: Mr Barron SC Mr R Cobden Solicitors for the Applicants: Gilbert & Tobin Counsel for the Respondents: Mr Webb Mr Green Solicitors for the Respondents: Banki Haddock Fiora Counsel for International Managers' Forum: Mr P Dwyer Solicitor for International Mangers' Forum: Dwyer & Co Date of Hearing: 14 March 2000 Date of Ruling: 14 March 2000