Friday 22 January 2016

Afro Leo

Is the cost of atmospheric music, stratospheric? Part 1

Ever found yourself tapping your foot at the till of your favourite clothing store or doing something more violent in that funky denim studio? Can you blame your compulsion to purchase that new bag solely on a mild personality disorder or should the background beat-of-the-street shoulder some of the blame? Facts are that atmospheric music is played by retailers and not just to soften the ring of the register but also because it is enjoyable and encourages sales. But how much do they pay and is it proportionate?

Late last year the Supreme Court of Appeal (the SCA - RSA’s highest commercial court) grappled with a rare case involving music royalties. The case, originally brought by a group of prominent retailers against the South African Performance Rights Association (SAMPRA) for charging excess rates for the licensing of background music that they played in their stores, is interesting because it is one of the very few cases on the determination of a reasonable royalty in South Africa. In this case, the court determined royalties based on international norms but not before dealing with a number of arguments related to the construction of the legislation, onus, competition law and property rights. The full case can be found here.


http://www.sampra.org.za/

Background

The retailer's obligation to pay a royalty is contained in s 9(A)(1)(a) of the Copyright Act 98 of 1978 (the Act). This section provides that in the absence of an agreement to the contrary no person may broadcast a sound recording without payment of a royalty to SAMPRA which is an accredited collecting society. This royalty is payable according to a tariff which is determined by agreement between the user and the performer and in the absence of an agreement, the determination may be referred to the Copyright Tribunal set up under the Act.

As one might expect there was a failure to reach an agreement and the matter was referred to the tribunal which then issued a ruling. No unsurprisingly too, after much debate this ruling found that a reasonable tariff lay somewhere between what the retailers and SAMPRA each thought was reasonable, with a cost order in favour of the retailers. SAMPRA appealed and there was no cross appeal from the retailers. Apparently cross though, the retailers opposed the appeal.

Basis of appeal

This can be summarised as follows:

  1. There was a failure of the tribunal to consider principles of competition law in determining the royalty;
  2. The tribunal’s authority to make a ruling only triggered once the retailers had established that the tariff was unreasonable which they had not done. This was effectively an argument based on onus and jurisdiction of the tribunal which SAMPRA thought had been misconstrued; and
  3. That the retailers were obliged to disclose the Rand value derived from the use of  the sound recordings, which they had not done, in determining the reasonableness of the tariff


Findings

On the question as to whether completion law principles were applied, the court gave short shrift to the argument and held that these were entirely new submissions and that it would be unfair to allow this now. Afro Leo suggests that procedurally this was the right approach and that although the competition arguments would have been very interesting to understand it appears somewhat desperate of SAMPRA. In any event, this Leo wonders whether, when determining reasonableness, competition elements are naturally considered without formal recourse to of this silo of law/economics?

The construction of the Act was much debated and considered by the SCA. The Act is ambiguous in its construction and described (with reference to Dean’s Handbook of South African Copyright Law) as a “rather tortuous statutory scheme in terms in terms of which the tribunal derives its power”. Afro Leo agrees. For those interested in the doing some mind gym have a look at paras 12-30 of the judgment. Essentially, the court held that all that is required of retailers or claimant is to place evidence before the tribunal that the claim is well founded (there is no formal onus of proof) and “At the end of the day for the claimant to succeed the tribunal is required to be satisfied, on all the evidence placed before it [presumably including that of the respondent], that the claim is well founded.” This seems sensible.

Necessity of showing rand value

The question of whether the retailers should have lead evidence of the rand value they derived from use of the sound recording was considered; the argument essentially being that under the construction of S33(5)(b) of the Act, only once it had been established that this value was disproportionately lower than the proposed tariff could it be unreasonable, and that it would need to cause economic harm to the retailer. In addition, the recordings needed to sustain their business and no available alternative would serve the retailers economic interests (see paras 31- 37) . And you thought Everest was a challenge!

After hearing various experts on whether this information was available, how such a study would be conducted, what its probative value would be and sensitivities over confidentiality [the arguments are interesting], the court held that such evidence would be “prohibitively expensive and impractical as it would take too long to complete. In addition, it cannot be said that any conclusion reached could apply to all retailers” and therefore “not necessary”.

Afro Leo thinks that this is the correct ruling and wonders whether the court would take such a pragmatic approach to the evidence required to prove economic harm in trade mark dilution cases. Another reason why it seems correct is that in the Copyright Act, there exists a concept of a reasonable royalty in lieu of showing damages; implicitly recognising the difficulty of showing actual damage.

Market forces
Reasonableness and other methods for determining the tariff

The two proffered by resident Profs were the “market-based solution” and by benchmarking with tariffs used in other jurisdictions.

The market based approach essentially meant that, in the absence of an agreement, the market should be left to naturally determine the tariff. This approach was given short thrift by the court (just a single paragraph) after the Prof conceded that he was not aware of the legal framework which directed the tribunal to determine the tariff.  The court was perhaps too hasty here in its reasoning for it is still possible for the tribunal to determine the tariff, and then use a market based approach in its determination.

The remainder of the judgment focuses on benchmarking and this will be dealt with in a separate post. Ever wondered what the relationship is between Big Macs and music royalties? You will get the Whopper lowdown in Part 2.
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Tuesday 19 January 2016

Caroline B Ncube

New Anton Mostert Chair in IP at Stellenbosch University

A media release from the Anton Mostert Chair of Intellectual Property Law, the University of Stellenbosch  issued yesterday announced that Prof Owen Dean retired as the incumbent of the Anton Mostert Chair of Intellectual Property Law at the University of Stellenbosch at the end of 2015 and has been succeeded by Prof Sadulla Karjiker.

Congratulations to Prof Karjiker! 
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Afro Leo

UNISA hosts lecture on TK and Genetic Resource Protection...tomorrow

News just in from Prof Tana Pistorius is that there will be a lecture tomorrow at UNISA at Bamboo Hall (map here) between 11am and 1pm focusing on TK and Genetic Resource Protection ... and guess what, you are invited!

"Frantzeska will address IP’s response to market failures related to sub-patentable innovation or purely traditional knowledge with interesting applications. She will discuss the entry into force of the Convention on Biological Diversity and its implementation in national legislation. She will elaborate on alternative forms of entitlement possible under the current international legal framework and recent developments in the field such as the impact of the Nagoya Protocol, the EU Regulation on its implementation and the national initiatives.

Frantzeska Papadopoulou, Jur.Dr., LLM is today an Associate Professor at Stockholm University as well as in Linnaeus University in Sweden. She has worked for several years as the head of IP department for the Swedish Association of Industries. Dr. Papadopoulou was a member of the Swedish delegation in the Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional knowledge and Folklore during the years 2001-2008.

Please confirm with Ms Nomagugu Hlongwane [hlongn@unisa.ac.za] if you are able to attend."



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Monday 18 January 2016

Afro Leo

First January Post 2016

Greetings from the Afro-IP team and best wishes to our readers. As this little blog and community celebrates breaking through the 1 million pageview mark we share with you our most popular posts in 2015, in no particular order:

  1. Discussion over South Africa's Copyright Bill here, here and here;
  2. Tips for Protecting Street Art here;
  3. Yahoo's toils in Nigeria over Yahoo Yahoo! here;
  4. Protection, Promotion, Development and Management of Indigenous Knowledge Systems in RSA here, here and here;
  5. OAPI agent scandal over Madrid here;
  6. Software licensing - BSA's engagement with Government and RSA damages hearing;
  7. Commentary on Farida Shaheed's report on Copyright Policy and the Right to Science and Culture;
  8. OAPI's progress on the Singapore Treaty adoption here;
  9. Gambia's progress on the adoption of the Madrid System;
  10. The ASA's response to Cochrane's Google Adword complaint in RSA; and
  11. Case commentary in Blurred Lines and @SandtonDiscussion by Stobbs IP on Etraction here and here;

Special mention is made of the IPKat weblog, our guest bloggers and our readership, all of whom continue to support the journey into the heart of African IP as this blog continues to boast the single largest resource of searchable information on recent African IP news.

2015 also had its dose of sad news too with the retirement of Prof Jeremy Phillips both celebrated (with and for him) and mourned. No doubt he is enjoying his new endeavours and a much deserved break from IP with his family

We are always looking for good content and bloggers and guest posts. If you feel that you want an outlet for your talents or views or just want to alert us to something, please contact us here for further information.

Best wishes

The Afro-IP blogging team
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