24 August, 2015

Music Lost - The Beatles, US Fair Use and Estoppel in the UK

The music industry is a hugely cut-throat business, with the 'little guy' often being dominated by the big companies that control the market and access to the more lucrative avenues within that industry. Due to this drastic imbalance contracts can often be one-sided, take it or leave it types of negotiations, which can lead to contracts, or negotiations for those contracts, that are waged with mainly the interest of the record company as the vocal point. A very interesting case discussing the relationship with UK & US law, utilizing the latter as a fair use defense in the former, and bringing forth an argument on promissory estoppel in relation to contractual negotiations was handed down by Justice Arnold early last month. This writer, in shame, will admit he has not gotten around to discussing the case as promptly as he wanted, but decided it was high-time to address this case in more detail.

The case in question is Sony/ATV Music Publishing LLC v WPMC Ltd, which dealt with the Beatles' first concert on US soil, performed at the (now defunct) Washington DC Coliseum in February 1964. The concert was filmed, although with a very low production value, subsequently being shown in movie theaters across the country to capitalize the new Beatlemania sweeping the country. Through a complex set of events the defendant, Iambic, acquired a copy of the video of the concert, which was then passed onto Iambic's successor WPMC after Iambic went bankrupt. Christopher Hunt, who was the director and sole owner of both Iambic and WPMC, wanted to make a documentary based on the concert footage and sought a licence from the copyright holder to the Beatles' music, Sony/ATV. After long negotiations no license agreement was finalized, but a preliminary version of the documentary was made by Mr Hunt, and advertised on a website for the UK market. Sony/ATV found the website and took Iambic (and then WPMC) to court for copyright infringement.

The Beatles; an outfit of curiosity even for newer generations
The first issue in the case was a rarity in the world of IP; whether a contract had been concluded and if not, whether Sony would be still held to it through proprietary estoppel in their representations that Mr Hunt had relied on. During the negotiations for a synchronization license, emails exchanged between the parties were always headed "SUBJECT TO CONTRACT" or a similar wording, implying that no final contractual relationships have been concluded no matter what the content of the emails themselves. Although Sony/ATV had nearly agreed to a license with Mr Hunt, even concluding some emails with the sentence "...[I am] pleased to advise that I have now received approval for the following non-exclusive use"; however these 'agreements' were made with reservations, such as seeing the final documentary prior to accepting the license for the documentary.

Through their communication, viewed as a whole, Justice Arnold. who presided over the case, saw that no contract had been concluded. As all communication was headed as "subject to contract", which clearly indicated to both parties that no contract had been set pending certain agreed upon terms. This was important as to the estoppel claim, as there could be no reasonable reliance due to this express wording within the communication. Had the above phrasing not been included there potentially could have been a claim under estoppel.

Finally, Justice Arnold had to settle the issue of fair use under US law. As discussed previously on this blog, US fair use is an assessment of four factors (under 17 USC § 107): (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

As the documentary is a commercial work, it would have to be transformative in nature (i.e. adding something new with a different purpose of character) to benefit from fair use under the first factor. Due to the inclusion of the concert in its entirety, and a small amount of commentary accompanying it, Justice Arnold deemed the work to be only partly transformative.

The second factor was agreed upon by all parties as being an expressive work falling under the remit of copyright, adding to a possible finding of a lack of fair use.

Under the third factor, as the use of the copyright material was substantial (as the whole work was used) Justice Arnold did not agree that the use was within reasonable limits. The aim of the documentary could have been achieved by using less, which WPMC did not do, and therefore was a substantial copying in the light of fair use.

Finally, even in the absence of submitted evidence, Justice Arnold saw that the documentary could usurp the market for the copyright holder, as they could have very well used the footage to create a documentary of their own. As there might be a market for audiovisual works of the Beatles (with this writer thinking there definitely is), the documentary would also replace the provision of those types of works from the copyright holder, depriving them of the benefit of the audiovisual works. Also, Justice Arnold decided that, as there is a clear market for synchronization licenses, the market for those licenses would be damaged, as they would not necessarily be sought if one is not needed in all instances. He then concluded with a finding of no fair use.

Ultimately Sony/ATV succeeded in their infringement claim; however, the case is still pending in the US, and whether a different finding there would change the nature of the case remains to be seen. One would imagine the decision will be appealed, and this writer would be curious to see proprietary estoppel to be challenged higher up in the UK courts.

Source: IPKat

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