NEW ZEALAND PRESS ASSOCIATION LTD V TRUSTPOWER LTD AND ANOR HC WN CIV-2005-485-1695

NEW ZEALAND PRESS ASSOCIATION LTD V TRUSTPOWER LTD AND ANOR HC WN CIV-2005-485- 1695 27 March 2006IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2005-485-1695BETWEEN NEW ZEALAND PRESS ASSOCIATION LIMITED Appellant AND TRUSTPOWER LIMITED First Respondent AND PUBLIC RELATIONS INSTITUTE OF NEW ZEALAND Second Respondent Hearing: 15 February 2006 Appearances: B Brown, QC, with J Mallon for appellant No appearance for respondents Judgment: 27 March 2006 at 2.45 p.m.JUDGMENT OF MACKENZIE J[1] This is an appeal under s 224 of the Copyright Act 1994 ("the Act") against a decision of the Copyright Tribunal given on 27 July 2005 on an application under s 150 of the Act by Trustpower Ltd ("Trustpower") and Public Relations Institute of New Zealand ("PRINZ") in relation to a licensing scheme operated by the New Zealand Press Association ("NZPA"). The respondents have taken no active part in the appeal. [2] NZPA represents the interests of newspaper proprietors in New Zealand. In 2002, it introduced a licensing scheme under the Act. The scheme is operated by NZPA and administered by the Print Media Copyright Agency ("PMCA") on its behalf. The licensing scheme relates to the copying and distribution of newspaper clippings and articles. Copyright subsists in the content of newspapers. The schemeprovides a mechanism whereby NZPA, acting on behalf of the owners of the copyright in the various newspapers concerned, authorises persons wishing to copy newspaper articles and use them in a way which would otherwise infringe copyright to undertake that use, subject to the payment of a licence fee. The scheme became operative from 1 January 2003. Trustpower, as a major user, and PRINZ, as the representative of other major users, of the scheme, disputed the appropriateness of some aspects of the scheme, and exercised their right to refer the scheme to the Tribunal under s 150 of the Act. [3] The Tribunal conducted its hearings by first holding an interlocutory hearing before the Chairman on 22 July 2004, on which a substantial reserved decision was issued on 4 August 2004, defining the issues and addressing whether a number of matters which had been raised were within the jurisdiction of the Tribunal. A subsequent substantive hearing was held over four days in April 2005, and the decision delivered on 27 July 2005. The matters of concern to Trustpower and PRINZ had been refined into 14 complaints. Ten of the complaints were rejected or found to be not covered by the reference. On four complaints, some modification of the scheme was ordered. [4] The appeal relates to one of those modifications, which related to the difference in licence fee payable by clipping bureaux for the supply of copies of clippings to their clients. The scheme as implemented provided for a differential between the supply of clippings in hard copy, and in electronic format. The licence fee was 15 cents per copy for hard copies, and 35 cents per copy for copies in electronic format. The Tribunal directed that a uniform charge of 15 cents per copy should apply irrespective of format. NZPA appeals against that aspect of the decision, on the grounds: (a) That the Tribunal did not have jurisdiction to make that order; and (b) Alternatively, the Tribunal had no, or insufficient, evidence upon which to determine that 35 cents was an inappropriate charge and that 15 cents was the appropriate charge for electronic clippings.[5] A brief description of the scheme is necessary. The Tribunal described it as having two major parts, a primary scheme and a secondary scheme. Under the primary scheme, the user obtains a basic licence which allows it to take copies of material from 30 newspapers which include all New Zealand daily newspapers. The cost of the basic licence is determined by the number of employees in the licensee organisation. Additional publications such as community newspapers and magazines can be covered, for an additional fee. The licence allows the licensee to receive as many clippings or make as many photocopies as it wishes of any document covered by the licence. It also allows the licensee to receive electronic clippings and print them out, on the basis that the electronic clippings must be permanently deleted within 24 hours of delivery and may not be digitally copied. For further dealing with electronic clippings, an electronic licence may be purchased, which allows the licensee to copy the electronic documents internally by email or store them electronically. The electronic licence is of two types. The first allows the licensee to store the document for seven days, and the second allows the licensee to store the document indefinitely. An external supply extension to the basic licence may be purchased which authorises the licensee to distribute press clippings to third parties such as clients or professional advisers on an ad hoc basis. Trade and professional associations may obtain a licence to enable them to send clippings to members. [6] The secondary scheme relates purely to digital copying by the licensee and is available only through a clipping bureau. The Tribunal found that this option was developed as a result of negotiations with clipping bureaux, to meet their need for an option that allowed them to provide customers with clippings at a cost calculated on a "per clipping" basis, an option not available under the primary licence. The Tribunal described how the secondary scheme works. The end user of the clippings purchases a downstream licence from a clipping bureau. The bureau provides one electronic copy of each clipping to the licensee. For that, the clipping bureau pays a 35 cent copyright fee for each clipping made by the bureau and sent to a downstream licensee. The downstream licensee is charged a "downstream" cost of 95 cents per clipping for further electronic copying of the clippings supplied to it by the clipping bureau. The main restriction on that is that the copies must be deleted within sevendays. The downstream fee is collected from the downstream licensee by the clipping bureau on behalf of PMCA. [7] The Tribunal noted that a significant part the objections to the scheme addressed that secondary scheme. The Tribunal summarised its concerns as being that the secondary scheme is only available through clipping bureaux whereas there may be occasions when a licensee may wish to provide e-copies to customers or clients on a limited basis. However, to do so it must purchase a basic licence with an external extension. The objectors also considered that there was a discriminatory element in the secondary scheme in that it prevents a licensee availing itself of the advantages that a clipping agency might have together with an unfairly high cost associated with obtaining an anticipatory extension to enable a licensee to supply copies to others, when a basic licence fee for a limited number of copies together with a retrospective charge based on the number of copies sent to others would better recognise a licensee's specific requirements. [8] The Tribunal dealt with the aspect of the complaint which was concerned with the differential cost of 35 cents for an e-copy and 15 cents for a hard copy charged to clipping bureaux for supply to a downstream licensee. The Tribunal noted the significant implications of computer technology for copyright, and the significant challenges and concerns presented to copyright owners by the ease by which copies can be made and transmitted. It noted evidence that copyright owners, conscious of these matters, were very reluctant to authorise distribution of material in digital format. It found that reluctance to be understandable and said that the issue of electronic versus hard copy collection of clippings is plainly a matter of high relevance in assessing the reasonableness of the scheme. It found some of the differentiation in cost and supply of digital material and hard copy material difficult to substantiate or maintain, particularly in relation to news clippings. It noted that news clippings are different from part of a book or a lengthy magazine article, and it held that the "market destruction theory" advanced by one witness, namely that the release of a book in digital format might well mean the total destruction of the market for that book once it was released on to the internet and copied widely in that way, would not hold water in respect of a single newspaper clipping. The Tribunal noted that many newspapers also have on-line editions, which detracts weight fromthe "market destruction theory" so far as newspapers are concerned. It said that the concept of market destruction is simply not available to newspapers for newspaper clippings. It also noted the short life-span of newspapers as opposed to books or reference articles. The Tribunal expressed its conclusions in these terms:215 Given therefore that newspaper clippings in digital format have a totally different aspect and purpose to them from books or reference articles, we consider that the justification for the cost differentiation treatment that has been applied by Ms Sheat in Copyright Licensing Limited, cannot properly be applied to newspaper clippings. The issue of convenience to which Mr Hannan made reference does not in our view justify the significant differentiation in cost between hard copy and .digital material. Although, as we have already observed, the digital environment has significant implications in terms of attempting to deal with digital material on a technologically neutral basis, in considering the evidence placed before as a whole in particular that relating to the costing regime for digital and hard copy material, the Tribunal saw neither copyright related nor reasonable basis for the price differential imposed between electronic and hard copies. We are, therefore, of the opinion that this is an aspect of the scheme which is unreasonable. There should be consistency in terms of the fees per copy, and that there should be no differentiation between hard copy, electronic copy and faxed copies. Hard copy is supplied for 15 cents per copy. This scheme should be varied, to allow for payment of 15 cents per copy for electronic copies as well. For faxed copies the reality is that hard copy is delivered by a means other than post or courier. There is no basis for attributing a higher cost to faxed copies. There is no "value enhancement" inherent in delivery by this means. In reaching this conclusion we do not believe that the overall integrity of the scheme will be adversely affected, but the scheme will be rendered more reasonable to users.[9] The first ground of appeal is that the modification ordered in respect of the licence fee for the supply of copies by clipping bureaux was beyond the jurisdiction of the Tribunal under s 150 of the Act. That section provides as follows:150 Reference of licensing scheme to Tribunal(1) If, while a licensing scheme is in operation, a dispute arises between the operator of the scheme and— (a) A person claiming that he or she requires a licence in a case of a description to which the scheme applies; or (b) An organisation claiming to be representative of such persons,— the operator or that person or organisation may refer the scheme, in so far as it relates to cases of that description, to the Tribunal. (2) A scheme that has been referred to the Tribunal under this section shall remain in operation until proceedings on the reference are concluded.(3) The Tribunal shall consider the matter in dispute and make such order, either confirming or varying the scheme so far as it relates to cases of the description to which the reference relates, as the Tribunal may determine to be reasonable in the circumstances. (4) The order may be made so as to be in force indefinitely or for such period as the Tribunal may determine.[10] There are two aspects to the challenge to jurisdiction: (a) The objectors could not have referred the agreement between NZPA and press clipping bureaux to the Tribunal because that agreement does not involve a licence required by either of the objectors, and so does not fall within s 150(1); and (b) Alternatively, if the respondents could have referred the agreement to the Tribunal, they did not in fact do so, so that it was not included within the terms of reference and was accordingly not a matter in respect of which the Tribunal could order a variation. [11] The Tribunal has jurisdiction only to consider matters which are properly referred to it. Under s 150, the right to refer arises where there is a dispute between the operator of the scheme and a person who "requires a licence in a case of a description to which the scheme applies". What may be referred is "the scheme, in so far as it relates to cases of that description". The Tribunal's power is to make an order "confirming or varying the scheme so far as it relates to cases of the description to which the reference relates". It is NZPA's submission that the types of licence required by the objectors are a licence under the primary scheme and a downstream licence under the secondary scheme. It submits that such licences are separate and distinct from the type of licence which is required by a clipping bureau to enable the bureau to function. NZPA submits that the Tribunal was limited, on a reference by a person requiring a licence under the primary scheme, or a downstream licence, to ordering a variation of the scheme only so far as it relates to cases covered by those types of licence. [12] The term "licensing scheme" is defined as follows: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:[13] That definition contemplates that there will be different classes of cases in which copyright licences will be granted, and different terms attaching to the licences for the different classes. A related point was considered by the Court of Appeal in Audio-Visual Copyright Society Ltd v University of Auckland [2003] 1 NZLR 417, Randerson J said, delivering the judgment of the Court:[29] The powers of the tribunal under both ss 149 and 150 relate to confirming or varying the licensing scheme. There is no jurisdiction for the tribunal under those sections to deal with the terms of individual licences. The scheme must be approved as a whole or varied in such manner as the tribunal determines to be reasonable in the circumstances. The tribunal is also required, in determining what is reasonable, to have regard to the availability of other schemes or licences and their terms and is obliged to exercise its powers to ensure there is no unreasonable discrimination between licensees or prospective licensees (s 161). [30] It follows from these provisions that the licensing scheme must be one in which licences will be available on the same terms to persons requiring licences in a case to which the scheme would apply. .That might be seen as inconsistent with the view I have expressed that a scheme may include more than one category of licence. I do not consider that, in its context, it is to be so understood. In that case, the question was whether the scheme was "in operation" before any licences had been issued under it. The important point on that question was that all licences issued will be on standard terms for all licensees, not varying between one licensee and another. The possibility that there may be more than one class of licence, each with its own standard terms for all licensees in that class, was not in issue. [14] It is to be noted that the definition refers to "classes of cases", but s 150 refers to "a case of a description to which the scheme applies". That difference in wording suggests that the phrase "a case of the description to which the reference relates" in s150(3) is not necessarily coterminous with a "class of cases" to which a particular form of licence may apply. Two propositions are, however, clear: (a) There may be more than one "class of case" in which licences may be granted under a licensing scheme; and (b) The reference of a licensing scheme to the Tribunal is limited to a part of the scheme only, namely "case of the description to which the reference relates". [15] I consider that it follows from those two propositions that the term "cases of the description to which the reference relates" is not intended to extend to cases which are not within the class of cases covered by the particular licence which the objector requires under the scheme. That is to say, I do not consider that the statutory framework is such as to confer a right on an objector to have the Tribunal consider modifications to the scheme, except so far as those modifications may relate to the type of licence which the objector requires. [16] I consider that, in the context of this scheme, the licence held by a clipping bureau is a different class of licence from both the primary licence and the downstream licence. The terms of each of those licences is different, since the needs of a clipping bureau, which requires a licence which will enable it to supply copies to its clients, are clearly different from those of a user wishing to take copies only for its own internal purposes. [17] It might be contended for the objectors in this case that, although they do not require a clipping bureau licence under the scheme, the downstream licence, which they do require, is dependent upon the receipt of material from the holder of a clipping bureau licence, and that the licence fee payable by the clipping bureau in respect of material supplied to the objectors will be passed on. I do not consider that that is sufficient to give rise to jurisdiction in this case. [18] The terms of s 150 are clear in confirming the ability to refer a scheme to persons required to hold a licence, and representatives of such persons. It does not extend to persons who may be indirectly affected by the terms of a licence. The feespayable by clipping bureaux will affect all their customers, whether they hold a downstream licence or not. The requirement to hold a downstream licence for receipt of digital clippings, and the fact that such a downstream licence is purchased from the clipping bureau rather than from PMCA direct, is not, in my view, sufficient to enable a person who is required to hold a downstream licence to refer to the Tribunal the terms of the clipping bureaux class of licence. [19] For these reasons, I am satisfied that the reference did not give the Tribunal jurisdiction to vary the fees payable under the clipping bureaux licence. [20] In case I am wrong in that, I deal with the second limb of the jurisdiction ground of appeal, which is that, even if the objectors could have referred the matter of the differential fees payable under the clipping bureau licence to the Tribunal, they did not in fact do so. The submission that it was not within the Tribunal's terms of reference was dealt with by the Tribunal in its decision as follows:[184] Again Mr Chapman suggests that no objection has been raised to this particular issue, although once again Mr Brown argues that it cannot be considered to have been included in the reference. In the applicants' argument, it has been suggested that the provisions of clause 9(1) and paragraph 18 of the PRINZ reference covers this particular issue. [185] In our view this complaint falls by implication within the PRINZ reference, paragraphs 9(a) and 18 and the Trustpower reference, paragraph 2 and should be considered. There can be no doubt that the respondent was plainly on notice that the reasonableness of its charges was at the forefront of the applicants' complaints. The differential for electronic copies was a critical aspect.[21] Paragraphs 9(a) and 18 of the PRINZ reference read as follows:9. In summary, PRINZ submits that: a. The PMCA scheme should offer a reasonably priced fee per copy option to end users. The fee per copy option would also be available as part of the External Supply Extension and for Trade and Professional Associations. 18. We submit that the rates for Trade and Professional Associations are extortionate. If PRINZ sent an e-mail of any clippings to all members it would cost 800 (members) times $25 equals $20,000. [see Price List: Emailed or faxed articles – 1 copy of any one cutting - $25 per member, per year. No more than 10 clippings a week to each member.] We believe this should obviously be available on a per clipping basis also. Five cents a clip would be a maximum. IfPRINZ (as an example) sent one clip a week to members (800 x 52 x .05) at the five cent rate it would still end up paying PMCA$2080.[22] When considering whether those references are to be regarded as sufficient to raise the issue, it is necessary to refer to the earlier decision of the Chairman of the Tribunal, to which I have earlier referred. There, it was held:[84] I shall now proceed to deal with those items as numbered by Mr Purches and, as Mr Brown suggested, exclude those items which are not within the jurisdiction of the Tribunal: . (v) The PMCA/NPA's licensing scheme's treatment format shifting where clipping agencies and end users sending and/or receiving clippings digitally are treated differently for no other apparent reason than the PMCA's belief that the use of this format will result in increased republication of material. Costs for those receiving clippings electronically (via e-mail) is significantly higher than for those receiving hard copies by courier, mail or fax, or higher again if the material is retained for more than seven days and even higher again if the material is retained for more than a year. This head of reference appears to go more to the issue of the nature of copying under s 16 as expanded by s 2 than the scheme itself. It is an aspect of the scheme and it is also to be noted that Mr Purches directed the thrust of his argument about electronic material on the basis of a permitted use and fair use for the purposes of research. The overall costing structure of the scheme may well be a matter for consideration by the Tribunal but differentiation upon the basis of format cannot be advanced as a separate head of reference.[23] When the matter is seen in the light of that ruling, I consider that the Tribunal has adopted an unduly lenient view in regarding the references on which it relied in the PRINZ reference as a sufficient peg on which to hang a variation of the fees for the different formats of supply by clipping bureaux to clients. I consider that the Tribunal did not have jurisdiction, under the terms of reference, to make the variation which it did in respect of those fees. [24] My conclusion that, on both of the grounds advanced in respect of jurisdiction, the variation in respect of the fees payable by clipping bureaux was beyond the jurisdiction of the Tribunal makes it unnecessary for me to consider the final ground of appeal, which was that there was insufficient evidence on which to base the decision. Ms Mallon undertook a careful review of the evidence on thematter, which it is unnecessary for me to detail. All that I think needs to be said on the subject is that, because the reference was by end users rather than by a clipping bureau, and no clipping bureau was a party to the reference, there was no evidence directed specifically to the situation of the clipping bureaux, or to the effect for such bureaux of a variation in the charges. I consider that such evidence would be necessary before a variation of the clipping bureau licence was ordered. [25] For the foregoing reasons, the appeal is allowed. The decision of the Tribunal is varied by deleting the variation provided for in clause 215 of the decision, namely that "this scheme should be varied, to allow for payment of 15 cents per copy for electronic copies as well". In all other respects, the variations made by the Tribunal are confirmed. "A D MacKenzie J"SolicitorsBell Gully, Wellington, for appellants Buddle Findlay, Wellington, for respondents