COPYRIGHT TRIBUNAL OF AUSTRALIA

Copyright Agency Limited v University of Adelaide (Interim Orders) [2019] ACopyT 2

COMMONWEALTH OF AUSTRALIA

Copyright Act 1968

THE TRIBUNAL ORDERS THAT:

1.    The parties are to bring in a minute of order within 7 days.

2.    If the parties are unable to reach agreement about the minute of order the matter will be listed for debate about the orders on 22 May 2019 at 9.30 am.

REASONS FOR DETERMINATION

PERRAM J (DEPUTY PRESIDENT):

1    Presently pending before the Tribunal is an application by the Copyright Agency Ltd (‘CAL’) under ss 113P, 113R and 153A of the Copyright Act 1968 (Cth) (‘the Act’) to determine the methodology for ascertaining, and the amount of, equitable remuneration payable to it by the Respondents who are a number of universities (‘the Universities’). The remuneration relates to the copying and communication of copyright works by the Universities under a statutory licence pursuant to s 113P of the Act for the period 1 January 2019 to 31 December 2024.

2    Pending the determination of that application CAL has applied for interim orders under s 160 of the Act to the effect that the relevant terms of an agreement between CAL and the Universities dated 23 May 2017 (‘the 2017 Agreement’) should continue until the principal application is determined. That agreement provides for an annual payment of $32.5 million.

3    The Universities resist such an interim regime. They say that they should only have to pay half of that sum to CAL in the interim period and that they should be permitted to pay the other half into an interest-bearing account pending the final determination of CAL’s application. They seek such a reduction because they say that the final determination by the Tribunal of equitable remuneration in this proceeding will amount to no more than $16.25 million annually, i.e. no more than half of the payment under the 2017 Agreement. The Universities consider this to be so because, inter alia, the total number of pages copied or communicated per student in reliance on the statutory licence has fallen by half. CAL notes, in response, that the tuition fees received per student by the Universities have not been affected by this phenomenon and it does not see why the final determination of its equitable remuneration will be affected by it either. Slipping into a dining metaphor, CAL points out that one does not get a discount on a restaurant meal just because one does not eat everything on one’s plate.

4    Section 160 provides:

160    Interim Orders

Where an application or reference is made to the Tribunal under this Act, the Tribunal may make an interim order having effect until the final decision of the Tribunal on the application or reference.

5    The principles upon which interim orders may be made are well-known. The exercise of the power is informed by some or all of the considerations governing the grant of interlocutory injunctions by a court; the issue is whether it is reasonable and appropriate to grant interim relief; the nature of the interim relief is not confined by the final relief sought; and, importantly, the Tribunal should not try to determine the reasonableness of the equitable remuneration ahead of the final hearing: Application by Isentia Pty Limited [2018] ACopyT 4 at [12], [14] per Greenwood P.

6    Consequently, at an interim level, it is not productive to try to get to the correctness of either party’s argument on final equitable remuneration (or the correctness of number of associated arguments with which both parties’ positions on final remuneration were eventually encrusted). For present purposes, it suffices to say that both positions seem reasonable on their face (which is presumably why the parties, who are very well advised, have not been able to reach agreement).

7    One aspect of CAL’s submissions may be dispatched at the outset. It seeks a purportedly interim order pursuant to s 160 that the Universities pay as ‘equitable remuneration’ the amount provided for in the now expired 2017 Agreement. From CAL’s submissions it is apparent that this means final equitable remuneration for the purpose of s 113Q(1)(b)(i) of the Act and the evident intent of the suggestion is to act as a foil to any later suggestion by the Universities that that amount of equitable remuneration be retrospectively adjusted when the final determination is made (should the final determination be that less equitable remuneration than the interim order provides for should be paid in the interim period). Since s 113R(3) explicitly allows such a retrospective determination to be made CAL’s proposed form of order, if accepted, would undermine its intended operation.

8    My reading of s 160 is that although the power it confers is broad and is not necessarily limited by the nature of the final relief sought, nevertheless s 160 does not permit the making, on a purportedly interim basis, of orders which—if CAL be correct—are actually final in nature. In my opinion, such a construction of 160 would be absurd. It would result in a provision which is explicitly concerned with interim arrangements in fact being used to produce results which are final. The word ‘interim’ does not permit that outcome. If I am wrong in that conclusion and the Tribunal does have such a curious power I would decline to exercise it in this case. This is because it would effectively determine the equitable remuneration in the interim period against the Universities without them ever being heard on the substance of the issue. This would be unfair.

9    I therefore proceed on the form of order proposed by the Universities which provides for interim payments to CAL prior to the final determination of CAL’s application without determining equitable remuneration in the interim period. The remaining question is what is the annual amount of the interim payment that should now be ordered.

10    The difficulty which now arises is that the power of the Tribunal to make a final award of equitable remuneration can be exercised retrospectively, in this case, including to the period during which any interim remuneration is paid under s 160: s 113R(3). If the Tribunal ultimately accepts the Universities’ submission that the remuneration should be slashed by 50% and does so from 1 January 2019 (when the former agreement expired) then a difficulty will arise if the Tribunal has earlier ordered, on an interim basis, the payment of a higher sum (such as, for example, the full $32.5 million). In that circumstance, it is unlikely that CAL will refund any overpayment.

11    The Universities may be entitled in curial proceedings to restitution of these monies by analogy with the principle that money paid under a reversed or varied judgment is recoverable on a common law money count for ‘restitutio in integrum of the right of every successful appellant’: Commonwealth v McCormack [1984] HCA 57; 155 CLR 273 at 276-277 per Murphy, Wilson, Brennan, Deane and Dawson JJ, applying Cox v Hakes (1890) 15 App Cas 506 at 547 per Lord Field and Rodger v The Comptoir D’Escompte de Paris (1871) LR 3 PC 465 at 475 per Lord Cairns. However, it is also likely that if such an analogous principle did apply then CAL would have a good defence based on change in position for it is a collecting society which passes on the funds its receives to its members and may perhaps in that circumstance be regarded as something of ‘a mere conduit-pipe’: Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; 164 CLR 662 at 674 per Mason CJ, Wilson, Deane, Toohey and Gaudron JJ. In any event, the hearing of the present application proceeded on an assumption by both parties that if CAL obtained from the Tribunal at a final hearing a lesser amount of equitable remuneration in the interim period than it had been paid during that period under any order made under s 160, it would not be returning the balance to the Universities.

12    It is against the prospect of that outcome that the Universities would like to see half of the $32.5 million ($16.25 million) paid into an interest-bearing account in the parties’ joint names. If that is done, and the Tribunal ultimately decides that the remuneration should be reduced below the $32.5 million specified in the 2017 Agreement, then the Universities will get their money back. They will remain exposed to irremediable loss if the final remuneration dips below $16.25 million but this was a risk they submitted they were willing to brave.

13    CAL resisted this approach because it would immediately cut the revenue it receives from the Universities by $16.25 million per annum. It might have been thought that it was some balm to this privation that if the Tribunal were eventually persuaded that the Universities should continue to pay $32.5 million then it would receive the unpaid balance out of the joint account. CAL’s answer to that was that many of its members—publishers and authors—depended on the stream of revenue flowing from CAL and that some of these persons and entities would suffer irremediable hardship if the tap were turned down by half even for one or two years. It was explicitly submitted that these hardships would not be reversed if subsequently the $16.25 million were released. CAL submitted that if any money were to be siphoned off to an interest-bearing account, that amount should be no more than 10% of $32.5 million.

14    Other ways this problem might be addressed can be imagined. For example, if the Tribunal concluded that the remuneration during the interim period was too high, it might be able to adjust the remuneration in later periods to make up for this. But there are problems with this approach which are both substantive and procedural. Procedurally, nobody can be sure that the Tribunal ultimately would make such an equalizing order. Whilst it is the case, I think, that the amount of remuneration which has been paid under an interim order is relevant to the fixing of remuneration more generally, that tells one nothing about what the Tribunal may ultimately do. So there would be risks attending any solution that assumes that the Tribunal will take that course of action.

15    Substantively there are problems too. These arise from the fact that CAL distributes the remuneration it receives to its members using a sampling method which generates results which appear, at least to the uninitiated, eccentric. If the sampling carried out reveals that there has been copying of that author’s works then the author will receive remuneration from CAL. But if not, the author will receive none. This leads to the frequent outcome that authors and publishers receive remuneration in some years but not others depending on how they went in the sampling lottery. The difficulty this generates is that if the Tribunal were to order interim payments in, say, the 2019 year and then determine later that this was too high and therefore adjust the compensation paid in the 2020 year, this would most likely take money off persons and entities in the 2020 year who had not received interim payments in 2019. Although that outcome would not be an issue when looked at the level of CAL, it looks distinctly unfair and arbitrary when examined at the level of the authors and publishers. For similar reasons, it is probably not plausible to expect that CAL might agree to such a regime particularly if, as appears to be the case, its duties to its members are in some senses that of a trustee and beneficiary. To be fair to CAL, this awkward situation is the result of the sampling regime.

16    So the choice which arises is really between two quite unattractive outcomes. On the one hand, there is the possibility—although not the certainty—that the Universities will ultimately succeed in persuading the Tribunal to award less than $32.5 million per year in equitable remuneration in which case, on CAL’s interim proposal, they will be irremediably out of pocket for the difference. Put another way, the Universities may suffer a loss of somewhere between $0 and $16.25 million depending on the outcome of the Tribunal’s deliberations. As to the size of this risk, I do not feel that one can say more than that it is real and that the Universities’ position is not trivial. I do not accept CAL’s submissions that the fact that Universities are in receipt of very large sums of money which dwarf the amounts in dispute here means they suffer no substantive prejudice. On no view is the loss of up to $16.25 million not a form of serious prejudice. Nor do I accept that the fact that loss is distributed between the Universities reduces the significance of the prejudice. The amount per institution would of course be less but it would be quite unsound to ignore the fact that a larger number of institutions would then be involved.

17    On the other hand, there is the certain fact that CAL’s remuneration will be cut by $16.25 million on the Universities’ interim proposal and also the less certain fact that this may cause irremediable harm to some of CAL’s members. The first fact is not in itself persuasive. It is sufficiently remediated by the fact that the $16.25 million will be held in the joint account pending the final determination. If CAL turns out to be entitled to it in the relevant years CAL and its members will eventually receive it. The only prejudice therefore is one of timing (noting the joint account is to be interest-bearing). Subject to the hardship argument, it was not submitted that timing, in and of itself, affected the analysis.

18    It thus becomes necessary to examine the hardships claimed by CAL. I accept that the immediate reduction in revenue is a form of prejudice to CAL and its members, however, it is a prejudice which can be borne by those who will not suffer hardship merely from that delay. For example, some authors might not be caused irremediable prejudice by having to wait, as it was submitted they might, for two or three years to get their potential but not guaranteed cut of the licence fees because the income stream might be regarded by them as occasional depending on the sampling system. On this view, these persons are likely to regard the funds they receive from CAL as something of an occasional bonus forming only part of their discretionary spending. Having seen the list of authors and publishers involved, this is certainly a likely outcome in a number of cases. I do accept nevertheless that such a delay will be an inconvenience even to persons in this leisured class and that money today is worth more than money tomorrow.

19    Leaving that kind of prejudice aside which I am unable to call hardship, there were several categories of irremediable hardship put forward by CAL. The first concerned the Federation Press which indicated that were there to be a 50% reduction in university distributions this would cause it, in the short term, not to proceed with the publication of books where university distributions were likely to account for more than half the income on them. The second was evidence from Cengage Learning Australia Pty Ltd to the effect that a reduction by 50% in the income from CAL would result in a costs saving drive that would most likely result in the loss of employment of 3 full-time staff (out of 57 staff in the Higher Education Division). This would have some impact on the level of local content and a flow on effect for local authors as well as a loss of experienced staff. The third was evidence from Eleanor Curtain Publishing Pty Ltd that a 50% reduction in the revenue from CAL would lead to a significant reduction in the available capital. The fourth was evidence from the Australian Publisher Association. It represents the book, journal and electronic publishing industry. Its evidence was that a sudden fall in income from CAL would negatively affect its members many of whom relied upon the income to a significant degree. It was, so it was said, a fundamental element in their budgeting and investment decisions. Such a drop would be likely to cause reductions in their local staffing and increased reliance on overseas works. If the CAL revenue were lost altogether (which is not proposed) there would need to be, in one case, a one third reduction in staff. This would have a flow on effect to authors. The fifth was evidence from the Australian Society of Authors whose CEO said that if the university distributions were reduced many of its author members would experience financial hardship and some might be forced to abandon writing for educational content.

20    I accept the existence of these hardships as far as they go.

21    The difficulty which arises is that the prejudice likely to be suffered by CAL (or its members) and the prejudice likely to be suffered by the Universities are largely incommensurable. It is not certain that the prejudice that concerns the Universities will arise although if it does there is no doubt what it will be. On the other hand, there is no doubt that the prejudice which concerns CAL (delay) will occur but, by contrast, what this delay will actually entail is to an extent unclear as it is dependent on the sampling system and timing of the final determination of CAL’s application.

22    My impression of the five matters above is that the irremediable hardships identified by CAL are somewhat limited in scope. Although it is crude to put a raw figure on it, I do not think they are worth anything like $16.25 million if it was necessary to cost them. I regard that tool of analysis as being distinctly limited. Nevertheless, it seems to me that the potential irremediable harm to the Universities is greater in extent than to the members of CAL. It is, in that context, to be kept distinctly in mind that the irremediable harm to CAL is not the 50% reduction in its income per se but the delayed payment.

23    Accordingly, I have to come to the view that the appropriate interim order is the one proposed by the Universities. For completeness, I should note that I reject three other arguments. First, I do not accept the Universities’ submission that CAL could simply cover any shortfall in payments to its members from some long-term accounts into which it has been saving for a rainy day.

24    Secondly, I reject CAL’s submission that it was likely that the Tribunal would ultimately order a phase-in of any substantial reduction in equitable remuneration. Whilst the Tribunal has power to make such a phasing in order (Audio-Visual Copyright Society Ltd v New South Wales Department of School Education [1997] ACopyT 1 at 67-68 per Sheppard P) and whilst that power has often been used (e.g. Phonographic Performance Company of Australia Limited under section 154(1) of the Copyright Act 1968 (Cth) [2016] ACopyT 3 at [31]) this has frequently been by agreement or concession and there is essentially no guidance on when such an order might be made. That being so, the question of whether a phase-in order might be made is largely speculative. For example, the Universities may argue against any such phasing-in if they demonstrate that the remuneration has been far above where it should have been for an extended period of time (without in any way giving any credence at this stage to that argument). Since it is speculative whether a phase-in might be ordered, it does not assist CAL.

25    Thirdly, I reject CAL’s argument that the Tribunal should be reluctant to make an interim order that alters the remuneration so recently agreed in the 2017 Agreement. Whilst it is true that ordinarily this would be so (as noted by Greenwood P in Application by Streem Pty Limited [2018] ACopyT 1 at [21]), this consideration loses much of its force when the 2017 Agreement was expressed to be interim and not to be used for the purpose now pursued by CAL.

26    The parties are to bring in a minute of order within 7 days failing which it will be listed for debate about the orders on 22 May 2019.

Associate:

Dated:    8 May 2019

SCHEDULE OF PARTIES