Music & entertainment law blog

London entertainment law firm Crefovi is delighted to bring you this music & entertainment law blog, to provide you with forward-thinking and insightful information on hot business and legal issues in the music and entertainment sectors.

This music & entertainment law blog provides regular news and updates, and features summaries of recent news reports, on legal issues facing the global media and entertainment community, in particular in the United Kingdom and France. This music & entertainment law blog also provides timely updates and commentary on legal issues in the cinema, book publishing and music sectors. It is curated by the entertainment lawyers of our law firm, who specialise in advising our media & entertainment clients in London, Paris and internationally on all their legal issues.

London entertainment & media law firm advises, in particular, the fashion and luxury goods sectors, the music sector, film sector, art sector & high tech sector. Crefovi writes and curates this music & entertainment law blog to guide its clients through the complexities of media law.

We support our clients, who all work in the creative industries, in London, Paris and globally, in finding the best solutions to their various legal issues relating to business law, either on contentious or non-contentious matters.

Crefovi has a roster of music clients, ranging from music artists to record labels, and is a regular attendee of, and speaker at, entertainment business events, such as MIDEM, MaMa, SXSW, Comic Con, the Berlinale and EFM, the Cannes Film Festival & seminars organised by AIM, BPI, MPA and SACEM.

London entertainment law firm Crefovi believes that, due to exponential streaming of entertainment content, the music and film industries have radically and irrevocably changed in the last five years and that it is time for the entertainment sector to take stock and foster mutually beneficial partnerships between the music and film world, high tech companies and famous brands making their mark in the consumer goods & retail arena. Crefovi is there to support its entertainment clients in achieving this delicate balance in a fast-evolving environment.

Moreover, Crefovi has industry teams, built by experienced lawyers with a wide range of practice and geographic backgrounds. These industry teams apply their extensive industry expertise to best serve clients’ business needs. One of these industry teams is the Media & entertainment department, which curate this music & entertainment law blog below, for you.

Annabelle Gauberti, founding and managing partner of London entertainment and media law firm for the creative industries Crefovi, is also the president of the International association of lawyers for creative industries (ialci). This association is instrumental in providing very high quality seminars, webinars & brainstorming sessions on legal & business issues to which the creative industries are confronted.

Crefovi regularly updates its social media channels, such as Linkedin, Twitter, Instagram, YouTube and Facebook. Check our latest news there!

Loan-out companies and loan-out agreements: how to use them in the new IR35 landscape, in the UK?

Crefovi : 29/11/2021 10:13 am : Articles, Copyright litigation, Emerging companies, Employment, compensation & benefits, Entertainment & media, Fashion law, Gaming, Information technology - hardware, software & services, Intellectual property & IP litigation, Internet & digital media, Law of luxury goods, Music law, News, Trademark litigation

Perhaps surprisingly in a Conservative government, the IR35 rules have been tightened, in order to ensure that the taxman gets its fair share of revenues, when creators and their clients enter into entertainment, film, media and professional sports contractual arrangements. What is at stake for the creative industries in the UK? How to make the most of loan-out companies and loan-out agreements, while ensuring compliance with the revised IR35 rules?

Loan-out companies1. What are loan-out companies?

In the entertainment industry, accountants often advise their clients, who work as key talent and crew in the film, TV, sports and media sectors, to set up a personal service company (‟PSC”) with Companies House, the United Kingdom (‟UK”) registrar of limited companies.

Such personal service companies are also called ‟loan-out” corporations because this is the jargon term they are referred by, which comes from the USA. Indeed, the US, as a global leader in the entertainment industry, was the first country where creators used this form of US business entities to loan-out their services, via the corporate body, to their end-clients.

The creator is usually the sole shareholder and director of the loan-out company.

The loan-out entity is engaged by external third parties (i.e. the end-clients) to fulfil entertainment, media or professional sports services, which are going to be performed and executed solely by the creator. Consequently, it is the talent’s loan-out company that is referred to, and liable, in contracts to perform the services required.

Since the creator’s services are typically performed on individual contract bases, in exchange of large, irregular sums of income throughout the year, the loan-out business model is especially prominent in the entertainment, media and professional sports industries.

Article 17 of the OECD Model Income Tax treaty of 1930 appears to be the foundation by which loan-out corporation structures may be used, as it provides that athletes, celebrities, artists who operate across several countries, and who therefore earn income under several national taxation systems, may only be taxed in their home jurisdiction’s source of income (even without an established corporate body).

By the 1970s-1980s, loan-out companies, or PSCs as they are more commonly referred to by the UK taxman, HMRC, and UK lawmakers, were widely used by entertainers, top talent and crew, as well as professional sportspeople, in the UK.

2. How to use PSCs and loan-out agreements?

Loan-out companies are used as a means to reduce the personal liability of the talent, as well as protect their personal assets.

Indeed, since the SPC is the sole party to any services agreement entered into with the end-customer, then, such end-client cannot go after the personal assets and liability of the creator, in case things go south during the execution phase of such services. The end-client – who is the counterparty to that loan-out agreement – will only be able to sue the SPC and trigger the limited liability of such loan-out company.

Moreover, in the UK, private companies limited by shares (which represent over 95 per cent of all companies in existence in that country), limit the liability of their shareholders to creditors of the company, to the capital originally invested, i.e. the nominal value of the shares and any premium paid in return for the issue of the shares by the company. Therefore, a shareholder’s personal assets are protected in the event of the company’s insolvency or increased liability to a third party.

Also, in the UK, the corporate veil is thick and not often, or easily, pierced: UK company directors incur no personal liability because all their acts are undertaken as agents of the SCP. While there are certain circumstances where personal liability may be imposed by the UK courts, particularly in respect of wrongful or fraudulent trading, it is rare that the corporate veil is pierced, and that the owners are held accountable, on their own assets, to pay off the limited company’s debts.

In a loan-out agreement, the party which is the loan-out company is typically responsible for dealing with the tax and/or any applicable national insurance contributions (‟NICs”) on any payments made under this agreement, by the counterparty.

This loan-out structure is therefore beneficial to, and flexible for, the end-client, who is unencumbered by HMRC’s rules on income tax and employer NICs payable on employees’ salaries, as well as protective employment law regulations applying to employees and self-employed people/freelancers relating, in particular, to a right to holiday, the national minimum wage, workplace pension and the maximum amount of 48 work hours per week.

There are also some tax advantages to this loan-out arrangement for the creator: first, the range of expenses which the PSC may set against its taxable profits will be much wider than that allowed to an employee to set against their taxable income. Second, there will be a cash-flow benefit in avoiding income tax being deducted at source each month. Third, the individual, as shareholder, may be in a position to be paid dividends by their loan-out company, which is a more tax-efficient alternative to only being paid earnings as the PSC’s employee, since this dividend form of income is not subject to NICs.

Therefore, loan-out agreements often lead to win-win situations, for the talent and their end-clients, provided that such services agreements are drafted correctly. In particular, the producing entity needs to ensure that all intellectual property created by the talent is assigned to the production.

Such loan-out agreements are typically called ‟producer agreement” or certificate of engagement (‟COE”). Indeed, a COE transfers to a studio or production company all rights in the results and proceeds of the services of an independent contractor (talent like an actor, producer, model, director or professional sportsperson) on an entertainment production, such as a television movie, theatrical motion picture film, TV or online series, social media content, or commercial. The COE includes work made for hire and assignment provisions. The parties negotiate and execute the COE promptly after agreeing to all deal terms before entering into a long-form agreement, such as a producer agreement, at a later stage.

As there can be some risks with the loan-out approach, in case the COE and/or long-form agreement are drafted incorrectly, it is best practice to seek expert legal advice when drafting, and reviewing as well as negotiating, a loan-out agreement.

3. What is the future of loan-out companies and agreements within the new IR35 landscape?

While I highlighted that loan-out agreements may be a win-win arrangement for the creator and their end-clients, there is one entity which has a lot to lose out of them: the taxman.

By the late 1990s, there were concerns that PSCs were being widely used, in the UK, to disguise the fact that, in many situations, individuals were working effectively as their client’s employee, while garnering the loan-out structure’s tax benefits.

To counter this type of tax avoidance in the March 1999 Budget, the Labour government announced it would introduce provisions to allow the tax authorities to look through a contractual relationship, where services were provided through an intermediary such as a PSC, but the underlying relationship between the worker and the client had the characteristics of employment. In those circumstances, the Labour proposals went, the engagement would be treated as employment for tax purposes.

Provision to this effect was included in the Finance act 2000, with effect from the 2000/01 tax year. The legislation is commonly called ‟IR35”, after the number of the Budget press notice which first announced this measure.

For the last 20 years, IR35 remained controversial, but were retained, even by the Conservative governments which succeeded the Labour one.

However, concerns escalated when it was discovered that the use of PSCs was common by senior staff in the public sector and by contractors working for the state-owned broadcaster BBC.

Since 2014, the various Tory governments went about cleaning the slate, by reforming the way the IR35 rules worked in the public sector. Following these reforms to the application of IR35 in the public sector, the government introduced legislation to make similar changes for the private sector to take effect from April 2021.

How do these changes affect creators in the entertainment, media and professional sports industries, since April 2021?

From 6 April 2021, IR35 rules applying to PSCs shift the responsibility from the PSC to the organisation receiving the talent’s services.

Before 6 April 2021, it was the loan-out company that was responsible for assessing and making payment of income tax and/or NICs for the services being provided by the creator/talent.

The government’s reforms for private sector companies are intended to improve compliance with the IR35 rules by moving the responsibility for tax assessment and payment from the contractor to the end-client. What this means, in the film, media and sports context, is that a producer engaging the services of a talent is now responsible for assessing whether that individual should be legally treated as an employee if they were being engaged directly by the producer, rather than through the loan-out company, and, if so, for accurately deducing income tax and NICs from the individual’s pay.

However, this change only affects large and medium size businesses, meaning that producers which fall into the category of a ‟small business” are not affected by the new IR35 provisions. However, it is not yet known how a ‟small business” will be defined by HMRC, and what criteria will be applied by HMRC to any assessment as to business size.

For example, our law firm Crefovi recently advised a client, whose producer services were retained by a production company working on behalf of the BBC, the commissioning broadcaster of an upcoming TV series, via his loan-out company. When I asked this client how much the budget of these TV series was, since such information was not disclosed in the draft producer agreement he had asked us to review and analyse on his behalf, he replied ‟GBP10 million”. I would argue that this budget size definitely places the BBC- commissioned production company into the category of ‟medium to large business”. Yet, the production company’s solicitor had drafted the loan-out agreement in such a way that the onus of paying any income tax and NICs liabilities, on the producer’s payments, layed solely with our client’s loan-out company, not with the production company.

Even if HMRC has confirmed, in its guidance on the new IR35 rules, that ‟customers will not have to pay penalties for inaccuracies in the first 12 months relating to the off-payroll working rules, regardless of when the inaccuracies are identified, unless there’s evidence of deliberate non-compliance”, and that HRMC ‟will not use information acquired as a result of the changes to the off-payroll working rules to open a new compliance enquiry into returns for tax years before 2021 to 2022, unless there is reason to suspect fraud or criminal behaviour”, it seems that UK production companies and their accountants and lawyers still turn a blind eye on their new responsibilities, post April 2021. This will trigger quite a few compliance enquiries with HMRC and, no doubt, tax litigation in the coming years.

Watch that space and, if you are a responsible creator, or production company owner, do reach out to us, at Crefovi, so that we may advise you on how to still rip the benefits of loan-out companies and structures, while minimising heightened legal and tax risks caused by this more stringent IR35 framework.

 

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    Songwriting credits: is the current music copyright framework forcing artists to hand them out, to avoid full-blown litigation?

    Crefovi : 01/11/2021 12:42 pm : Antitrust & competition, Articles, Copyright litigation, Entertainment & media, Intellectual property & IP litigation, Litigation & dispute resolution, Music law, News

    In the old days, musicians only had to clear the use of samples that they had taken out of other songs, created and released by other songwriters, composers and performers.

    However, since the ‟Blurred lines” case, musicians, their labels and publishers should also obtain licences from the rightowners of any other song already in the public domain, which has a similar feel, vibe – a ‟sound alike”-, preferably before, but otherwise after, the new song is released.

    In this uncertain musical environment, in which even the most simple of musical compositions could be deemed to be protected by copyright, by a court jury and/or a judge, how do musical artists and their advisers deal with copyright infringement claims (actual or possible), to preserve the performer’s reputation and commercial success of their musical output? Is the strategy of handing out songwriting credits the best, in this environment?

    Songwriting credits1. Before the ‟Blurred lines” case: licence clearance mostly limited to samples

    As explained in my article ‟What’s wrong with musical adaptations of French songs and their ensuing rights?”, the world used to be a pretty simple place, whereby you only had to negotiate a licence in case you sampled – i.e. took a portion, or sample, of one sound recording and reused it as an instrument or a sound recording in a different song.

    For example, sampling is the technique that brought Barry White’s groove ‟It’s ecstasy when you lay down next to me” to the top of the charts as part of ‟Rock DJ” by Robbie Williams.

    The legal habit of obtaining a copyright licence to use a sample was established after the landmark judgement Grand Upright v Warner Bros Records was handed down in 1991. In this copyright case heard by the United States district court for the Southern district of New York, songwriter Gilbert O’Sullivan sued rapper Biz Markie after the latter sampled a portion of O’Sullivan’s song ‟Alone again (naturally)” in his own track ‟Alone again”, without permission. Specifically, O’Sullivan alleged that Biz Markie had used a section of the introduction to ‟Alone again, naturally” in ‟Alone again”. O’Sullivan’s claim was upheld by the court and the landmark ruling altered the landscape of hip-hop and rap, finding that all samples must be cleared with the original artist before being used.

    So, after 1991, the rule of obtaining a prior copyright licence to use a sample was clearly set, and usually followed, although some hurdles still happened, along the way.

    The most notorious of these sample clearance cases relates to the Verve‘s 1997 song, ‟Bitter sweet symphony”, written by the Verve’s singer and songwriter Richard Ashcroft. The track is based on a sample from the Andrew Loog Oldham orchestral cover of the Rolling Stones’ hit ‟The last time”. Other instrumental figures were tried out, which could have replaced the sample and consequently have removed the need for a clearance. However, these attempts failed and, at the last minute, with a release date already set, a negotiation was embarked upon with the Rolling Stones’ manager at the time, Allen Klein. As a result, Mick Jagger and Keith Richards were ‟added” to the songwriting credits, and all copyright royalties from the song went to them, since the talented the Verve frontman had to waive any possible songwriting share for himself, to make sure that the record got released: 100 percent was credited to M. Jagger and K. Richards and their publishers! In April 2019, after more than 20 years, M. Jagger and K. Richards finally signed over their copyrights to the song to the Verve’s talented frontman, Richard Ashcroft.

    So, the rule was clear, for samplers, the world over: include the section of the track you want to use in a rough mix of your new song, for demonstration purposes only, and get the permissions you need based on that, before spending time, money and efforts refining the track and mixing it to perfection. That way, if your concept is not deemed acceptable by, or you can’t strike a deal with, the rightowners and their publishers, you can go back to the drawing board without too much resources having been lost.

    This strategy was most important for the rap and hip-hop community, as this musical genre makes heavy use of sampling.

    However, on more than one occasion, sample clearance fees prohibited the use of more than one or two samples for most tracks, with some copyright owners demanding up to 100 percent of royalties (as seen above in the Verve case).

    As each sample had to be cleared to avoid legal action, records such as those produced by Public Enemy, which use dozens of samples, became prohibitively expensive to produce.

    According to Pitchfork, ‟overnight it became forbiddingly difficult and expensive to incorporate even a handful of samples into a new beat… Producers scaled back their creations, often augmenting one choice groove with a bevy of instrumental embellishments”.

    As a result, interpolation came to the fore, splitting publishing rights and master rights in the sampling sphere. Indeed, when you record a song, there are two types of copyrights:

    • there is the copyright for the song composition and the lyrics, attributed to the songwriters, the lyricists and their respective publishers, so that’s often called the publishing rights, and

    • there is the copyright for the recording itself, which belongs to the artist performer and the record label, which is often called the master rights.

    Interpolation (i.e. replaying the requested sample using new instrumentalists, using the newly recorded version and simply paying the songwriters – and not the artist or the label, through a master licence – for use of the composition) became prevalent in the industry, especially in the work of Dr Dre. Indeed, Dr Dre’s production became styled around fewer samples per track, studio instrumentation, and sampling artists such as Parliament-Funkadelic who were amenable to having their music sampled. Perhaps the most famous example of interpolation is Eminem’s track ‟My name is”, produced by Dr Dre, which contains the replayed sample of Labi Siffre’s song ‟I got the…”.

    2. After the ‟Blurred lines” case: increased legal risk for creators in the music sphere

    This status quo, in relation to pre-copyright clearance – became a lot more complicated in 2013, with the ‟Blurred lines” case.

    Further to accusations by the family and estate of Marvin Gaye, that Pharrell Williams, Robin Thicke and T.I. had copied the ‟feel”, ‟groove” and ‟sound” of M. Gaye’s hit ‟Got to give it up”, in their new released single ‟Blurred lines”, P. Williams, R. Thicke and T.I. sued for a declaratory judgment that their track did not infringe copyrights of the defendants. In the lawsuit, the Gaye family was accused of making an invalid copyright claim since only tangible expressions of creative endeavours – not ideas – can be protected by copyright.

    Yet, the United States district court for the central district of California ruled the Gaye’s family counter-claims against R. Thicke and P. Williams could proceed, stating that the plaintiffs ‟ha(d) made sufficient showing that elements of ‟Blurred lines” may be substantially similar to protected, original elements of ‟Got to give it up””. In March 2015, a jury found R. Thicke and P. Williams, but not T.I., liable for copyright infringement, awarding the Gaye’s family USD7.4 million in damages and profits for copyright infringement, and crediting Marvin Gaye as a songwriter for ‟Blurred lines”. Whilst the verdict was lowered from USD7.4 million to USD5.3 million, R. Thicke, P. Williams and T.I. appealed the judgment to the 9th circuit court of appeals of California in August 2016.

    However, in July 2018, the court of appeal confirmed the district court’s finding of infringement against P. Williams and R. Thicke, who had to pay, among other damages, the Gaye family USD5.3 million.

    Aptly named, the ‟Blurred lines” case blurred the lines of rather well-settled copyright doctrine, as well as sent shockwaves through the musical community: never before had a copyright infringement been determined simply because the ‟groove” of two songs sounded similar. The landmark judgment has, at the very minimum, put artists and publishers on notice as to how they should approach musical composition to avoid legal issues.

    So, has the ‟Blurred lines” case created a precedent, and therefore stifled music creativity?

    3. Giving songwriting credits as a way out of any legal dispute?

    Firstly, any neurosis caused by the ‟Blurred lines” decision needs to be calmed, since fair use decisions, such as this one, are supposed to be taken on a ‟case by case” basis.

    There is a string of cases that confirm this approach, as follows:

    • the Gray v. Perry case in which Katy Perry had to fight copyright infringement claims made by a Christian rock band called Flame. Flame alleged that K. Perry’s song ‟Dark horse” infringed on their track ‟Joyful noise” (which had 300 plays on Soundcloud when the lawsuit was filed). The focus of the similarity was a short descending pattern known in music as an ‟ostinato”. In both songs, a short ostinato is used repeatedly to form part of the beat of each song and both ostinatos share similar descending shapes. Gray et al. claimed that the instrumental beat of the ostinato in ‟Joyful noise” was protectable original expression and that K. Perry et al. had access to, and copied, the ostinato when composing ‟Dark horse”. After a jury found K. Perry et al. guilty, the defendants filed an appeal against the jury verdict in October 2019. The district court employed the two-part test of extrinsic similarity (protectability of elements) and intrinsic similarity (access) to determine any substantial similarity. In March 2020, the court granted the defendants’ motion for judgment as a matter of law and vacated the jury’s verdict as to liability and damages, since Gray et al. failed to satisfy the extrinsic test for substantial similarity. In plain English, the core little synth melody (ostinato) that sounds alike is not a unique enough creative expression to be protected by copyright law, found the district court. This is especially true since this ostinato has been used all the way back to the Renaissance where composers would intentionally take competitors’ bass lines and write new original material over them.

    • the estate of Randy Wolfe (creator of the US progressive rock band Spirit) v. Led Zeppelin case in which Robert Plant and Jimmy Page were accused of copying the opening riff of ‟Stairway to heaven” from the Spirit song ‟Taurus”. In June 2016, a jury verdict found R. Plant and J. Page not guilty and, further to the appeal made by the estate of R. Wolfe, the 9th circuit court of appeal of California ruled in March 2020 that ‟Stairway to heaven” did not infringe Spirit’s ‟Taurus”, upholding the 2016 jury verdict. In October 2020, the US supreme court refused to hear the case following a petition filed by the estate of R. Wolfe, bringing a final close to this case.

    Secondly, it is true that more and more artists prefer to avoid litigation for alleged copyright infringement, preferring to swiftly settle by granting songwriting credits to any competing artists who come forward, claiming his or her song was lifted in the new hit track.

    Recently, Olivia Rodrigo, an 18 years’ old American singer-songwriter who recently released her debut album ‟Sour” in May 2021 to critical acclaim, made the headlines for handing out numerous co-writers songwriting credits to Taylor Swift and St. Vincent for her song ‟Déjà Vu”, and to Paramore frontwoman Hayley Williams and former band-member Josh Farro for her track ‟Good 4 U”. O. Rodrigo made this move after rather unsubstantiated allegations of plagiarism erupted on the internet, that her hit ‟Good 4 U” had similarities with Paramore’s 2007 song ‟Misery Business”, and that her track ‟Déjà Vu” was ‟influenced” by Taylor Swift’s ‟Cruel Summer”.

    While the word on the street is that Olivia Rodrigo would have won any copyright infringement lawsuit with respect to her tracks ‟Déjà Vu” and ‟Good 4 U”, the main concern here is about whether or not people want to deal with what can happen in court. Court is expensive. It can destroy someone’s public perception. The outcome of a court case is uncertain. So why not give a small percentage of credit upfront, in exchange for a settlement agreement where the potential claimant waives his or her right to file a lawsuit?

    So the new paradigm, today, in the music industry, is that as soon as a song becomes a hit (which, in itself, is very complicated, what with the noise created by the zillion of releases made daily on streaming sites, such as YouTube, and apps, such as Spotify), the artist who has just found fame can expect to have competitor musicians come at her/him for songwriting credits. And you definitely do not know who may come at you for a ‟vibe” or ‟groove”.

    This situation is compounded by the fact that, in the USA, radio plays do not generate any royalties for performers, while the songwriters get paid: so, as a recording artist, if you also have songwriting credits (on your own song or on the song of another artist whose granted you writing credit), then you get paid on those radio plays. Therefore, there is a strong incentive, for performers, to grab songwriting credits right and left, in order to increase their pool of income streams, which bulk usually comes from streaming (where 80 percent of the royalty payouts go to the master recording, while the publishing royalties usually hover around 12 to 13 percent).

    As an artist, it is up to you to devise the best strategy on how to deal with the heightened risk of potential copyright infringement claims, with your team of advisers (manager, entertainment lawyer, publisher), which fits your approach to handling conflict, your ability to withstand tough and protracted legal proceedings and negotiations, and the reputation you want to build for yourself in the public domain.

    Songwriting credits or litigation: that is the question.

     

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      How to enforce civil and commercial judgments after Brexit?

      Crefovi : 14/06/2021 10:45 am : Antitrust & competition, Art law, Articles, Banking & finance, Capital markets, Consumer goods & retail, Copyright litigation, Emerging companies, Employment, compensation & benefits, Entertainment & media, Fashion law, Gaming, Hospitality, Hostile takeovers, Information technology - hardware, software & services, Intellectual property & IP litigation, Internet & digital media, Law of luxury goods, Life sciences, Litigation & dispute resolution, Mergers & acquisitions, News, Private equity & private equity finance, Product liability, Tax, Technology transactions, Trademark litigation, Unsolicited bids

      As explained in our two previous articles relating to Brexit, ‟How to protect your creative business after Brexit?” and ‟Brexit legal implications: the road less travelled”, the European Union (‟EU”) regulations and conventions on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, ceased to apply in the United Kingdom (‟UK”) once it no longer was a EU member-state. Therefore, since 1 January 2021 (the ‟Transition date”), no clear legal system is in place, to enforce civil and commercial judgments after Brexit, in a EU member-state, or in the UK. Creative businesses now have to rely on domestic recognition regimes in the UK and each EU member-state, if in existence. This introduces additional procedural steps before a foreign judgment is recognised, which makes the enforcement of EU civil and commercial judgments in the UK, and of UK civil and commercial judgments in the EU, more time-consuming, complex and expensive.

      How to enforce civil and commercial judgments after Brexit1. How things worked before Brexit, with respect to the enforcement of civil and commercial judgments between the EU and the UK

      a. The EU legal framework

      Before the Transition date on which the UK ceased to be a EU member-state, there were, and there still are between the 27 remaining EU member-states, four main regimes that are applicable to civil and commercial judgments obtained from EU member-states, depending on when, and where, the relevant proceedings were started.

      Each regime applies to civil and commercial matters, and therefore excludes matters relating to revenue, customs and administrative law. There are also separate EU regimes applicable to matrimonial relationships, wills, successions, bankruptcy and social security.

      The most recent enforcement regime applicable to civil and commercial judgments is EU regulation n. 1215/2012 of the European parliament and of the council dated 12 December 2012 on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the ‟Recast Brussels regulation). It applies to EU member-states’ judgments handed down in proceedings started on or after 10 January 2015.

      The original Council regulation n. 44/2001 dated 22 December 2000 on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the ‟Original Brussels regulation”), although no longer in force upon the implementation of the Recast Brussels regulation on 9 January 2015, still applies to EU member-states’ judgments handed down in proceedings started before 10 January 2015.

      Moreover, the Brussels convention dated 27 September 1968 on the jurisdiction and the enforcement of judgments in civil and commercial matters (the ‟Brussels convention”), also continues to apply in relation to civil and commercial judgments between the 15 pre-2004 EU member-states and certain territories of EU member-states which are located outside the EU, such as Aruba, Caribbean Netherlands, Curacao, the French overseas territories and Mayotte. Before the Transition date, the Brussels convention also applied to judgments handed down in Gibraltar, a British overseas territory.

      Finally, the Lugano convention dated 16 September 1988 on the jurisdiction and the enforcement of judgments in civil and commercial matters (the ‟Lugano convention”), which was replaced on 21 December 2007 by the Lugano convention dated 30 October 2007 on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the ‟2007 Lugano convention”), govern the recognition and enforcement of civil and commercial judgments between the EU and certain member-states of the European Free Trade Association (‟EFTA”), namely Iceland, Switzerland, Norway and Denmark but not Liechtenstein, which never signed the Lugano convention.

      The 2007 Lugano convention was intended to replace both the Lugano convention and the Brussels convention. As such it was open to signature to both EFTA members-states and to EU member-states on behalf of their extra-EU territories. While the former purpose was achieved in 2010 with the ratification of the 2007 Lugano convention by all EFTA member-states (except Liechtenstein, as explained above), no EU member-state has yet acceded to the 2007 Lugano convention on behalf of its extra-EU territories.

      The UK has applied to join the 2007 Lugano convention after the Transition date, as we will explain in more details in section 2 below.

      b. Enforceability of remedies ordered by a EU court

      Before Brexit, the Recast Brussels regulation, the Original Brussels regulation, the Brussels convention, the Lugano convention and the 2007 Lugano convention (together, the ‟EU instruments”) provided, and still provide with respect to the 27 remaining EU member-states, for the enforcement of any judgment in a civil or commercial matter given by a court of tribunal of a EU member-state, whatever it is called by the original court. For example, article 2(a) of the Recast Brussels regulation provides for the enforcement of any ‟decree, order, decision or writ of execution, as well as a decision on the determination of costs or expenses by an officer of the court”.

      The Original Brussels regulation also extends to interim, provisional or protective relief (including injunctions), when ordered by a court which has jurisdiction by virtue of this regulation.

      c. Competent courts

      Before the Transition date, proceedings seeking recognition and enforcement of EU foreign judgments in the UK should be brought before the high court in England and Wales, the court of session in Scotland and the high court of Northern Ireland.

      Article 32 of the Brussels convention provides that the proceedings seeking recognition and enforcement of EU foreign judgments in France should be brought before the president of the ‟tribunal judiciaire”. Therefore, before the Transition date, a UK judgment had to be brought before such president, in order to be recognised and enforced in France.

      d. Separation of recognition and enforcement

      Before the Transition date, and for judgments that fell within the EU instruments other than the Recast Brussels regulation, the process for obtaining recognition of a EU judgment was set out in detail in Part 74 of the UK civil procedure rules (‟CPR”). The process involved applying to a high court master with the support of written evidence. The application should include, among other things, a verified or certified copy of the EU judgment and a certified translation (if necessary). The judgment debtor then had an opportunity to oppose appeal registration on certain limited grounds. Assuming the judgment debtor did not successfully oppose appeal registration, the judgment creditor could then take steps to enforce the judgment.

      Before the Transition date, and for judgments that fell within the Recast Brussels regulation, the position was different. Under article 36 of the Recast Brussels regulation, judgments from EU member-states are automatically recognised as if they were a judgment of a court in the state in which the judgment is being enforced; no special procedure is required for the judgment to be recognised. Therefore, prior to Brexit, all EU judgments that fell within the Recast Brussels regulation were automatically recognised as if they were UK judgments, by the high court in England and Wales, the court of session in Scotland and the high court of Northern Ireland. Similarly, all UK judgments that fell within the Recast Brussels regulation were automatically recognised as if they were French judgments, by the presidents of the French ‟tribunal judiciaires”.

      Under the EU instruments, any judgment handed down by a court or tribunal from a EU member-state can be recognised. There is no requirement that the judgment must be final and conclusive, and both monetary and non-monetary judgments are eligible to be recognised. Therefore, neither the UK courts, nor the French courts, are entitled to investigate the jurisdiction of the originating EU court. Such foreign judgments shall be recognised without any special procedures, subject to the grounds for non-recognition set out in article 45 of the Recast Brussels regulation, article 34 of the Original Brussels regulation and article 34 of the Lugano convention, as discussed in paragraph e. (Defences) below.

      For the EU judgment to be enforced in the UK, prior to the Transition date, and pursuant to article 42 of the Recast Brussels regulation and Part 74.4A of the CPR, the applicant had to provide the documents set out in above-mentioned article 42 to the UK court, i.e.

      • a copy of the judgment which satisfies the conditions necessary to establish its authenticity;

      • the certificate issued pursuant to article 53 of the Recast Brussels regulation, certifying that the above-mentioned judgment is enforceable and containing an extract of the judgment as well as, where appropriate, relevant information on the recoverable costs of the proceedings and the calculation of interest, and
      • if required by the court, a translation of the certificate and judgment.

      It was incumbent on the party resisting enforcement to apply for refusal of recognition of the EU judgment, pursuant to article 45 of the Recast Brussels regulation.

      Similarly, for UK judgments to be enforced in France, prior to the Transition date, the applicant had to provide the documents set out in above-mentioned article 42 to the French court, which would trigger the automatic enforcement of the UK judgment, in compliance with the principle of direct enforcement.

      e. Defences

      While a UK defendant may have raised merits-based defences to liability or to the scope of the award entered in the EU jurisdiction, the EU instruments contain express prohibitions on the review of the merits of a judgment from another EU member-state. Consequently, while a judgment debtor may have objected to the registration of a judgment under the EU instruments (or, in the case of the Recast Brussels regulation, which does not require such registration, appeal the recognition or enforcement of the foreign judgment), he or she could have done so only on strictly limited grounds.

      In the case of the Recast Brussels regulation, there are set out in above-mentioned article 45 and include:

      • if recognition of the judgment would be manifestly contrary to public policy;
      • if the judgment debtor was not served with proceedings in time to enable the preparation of a proper defence, or
      • if conflicting judgments exist in the UK or other EU member-states.

      Equivalent defences are set out in articles 34 to 35 of the Original Brussels regulation and the 2007 Lugano convention, respectively. The court may not have refused a declaration of enforceability on any other grounds.

      Another ground for challenging the recognition and enforcement of EU judgments is the breach of article 6 of the European Convention on Human Rights (‟ECHR”), which is the right to a fair trial. However, since a fundamental objective underlying the EU regime is to facilitate the free movement of judgments by providing a simple and rapid procedure, and since it was established in Maronier v Larmer [2003] QB 620 that this objective would be frustrated if EU courts of an enforcing EU member-state could be required to carry out a detailed review of whether the procedures that resulted in the judgment had complied with article 6 of the ECHR, there is a strong presumption that the EU court procedures of other signatories of the ECHR are compliant with article 6. Nonetheless, the presumption can be rebutted, in which case it would be contrary to public policy to enforce the judgment.

      To conclude, pre-Brexit, the EU regime (and, predominantly, the Recast Brussels regulation) was an integral part of the system of recognition and enforcement of judgments in the UK. However, after the Transition date, the UK left the EU regime as found in the Recast Brussels regulation, the Original Brussels regulation and the Brussels convention, since these instruments are only available to EU member-states.

      So what happens now?

      2. How things work after Brexit, with respect to the enforcement of civil and commercial judgments between the EU and the UK

      In an attempt to prepare the inevitable, the EU commission published on 27 August 2020 a revised notice setting out its views on how various conflicts of laws issues will be determined post-Brexit, including jurisdiction and the enforcement of judgments (the ‟EU notice”), while the UK ministry of justice published on 30 September 2020 Cross-border civil and commercial legal cases: guidance for legal professionals from 1 January 2021” (the ‟MoJ guidance”).

      a. The UK accessing the 2007 Lugano convention

      As mentioned above, the UK applied to join the 2007 Lugano convention on 8 April 2020, as this is the UK’s preferred regime for governing questions of jurisdiction and enforcement of judgments with the 27 remaining EU member-states, after the Transition date.

      However, accessing the 2007 Lugano convention is a four-step process and the UK has not executed those four stages in full yet.

      While step one was accomplished on 8 April 2020 when the UK applied to join, step two requires the EU (along with the other contracting parties, ie the EFTA member-states Iceland, Switzerland, Norway and Denmark) to approve the UK’s application to join, followed in step three by the UK depositing the instrument of accession. Step four is a three-month period, during which the EU (or any other contracting state) may object, in which case the 2007 Lugano convention will not enter into force between the UK and that party. Only after that three-month period has expired, does the 2007 Lugano convention enter into force in the UK.

      Therefore, in order for the 2007 Lugano convention to have entered into force by the Transition date, the UK had to have received the EU’s approval and deposited its instrument of accession by 1 October 2020. Neither have occured.

      Since the EU’s negotiating position, throughout Brexit, has always been ‟nothing is agreed until everything is agreed”, and in light of the recent collision course between the EU and the UK relating to trade in Northern Ireland, it is unlikely that the UK’s request to join the 2007 Lugano convention will be approved by the EU any time soon.

      b. The UK accessing the Hague convention

      Without the 2007 Lugano convention, the default position after the Transition date is that jurisdiction and enforcement of judgments for new cases issued in the UK will be determined by the domestic law of each UK jurisdiction (i.e. the common law of England and Wales, the common law of Scotland and the common law of Northern Ireland), supplemented by the Hague convention dated 30 June 2005 on choice of court agreements (‟The Hague convention”).

      I. At common law rules

      The common law relating to recognition and enforcement of judgments applies where the jurisdiction from which the judgment relates does not have an applicable treaty in place with the UK, or in the absence of any applicable UK statute. Prominent examples include judgments of the courts of the United States, China, Russia and Brazil. And now of the EU and its 27 remaining EU member-states.

      At common law, a foreign judgment is not directly enforceable in the UK, but instead will be treated as if it creates a contract debt between the parties. The foreign judgment must be final and conclusive, as well as for a specific monetary sum, and on the merits of the action. The creditor will then need to bring an action in the relevant UK jurisdiction for a simple debt, to obtain judicial recognition in accordance with Part 7 CPR, and an English judgment.

      Once the judgment creditor has obtained an English judgment in respect of the foreign judgment, that English judgment will be enforceable in the same way as any other judgment of a court in England.

      However, courts in the UK will not give judgment on such a debt, where the original court lacked jurisdiction according to the relevant UK conflict of law rules, if it was obtained by fraud, or is contrary to public policy or the requirements of natural justice.

      With such blurry and vague contours to the UK common law rules, no wonder that many lawyers and legal academics, on both sides of the Channel, decry the ‟mess” and ‟legal void” left by Brexit, as far as the enforcement and recognition of civil and commercial judgments in the UK are concerned.

      II. The Hague convention

      As mentioned above, from the Transition date onwards, the jurisdiction and enforcement of judgments for new cases issued in England and Wales will be determined by its common law, supplemented by the Hague convention.

      The Hague convention gives effect to exclusive choice of court clauses, and provides for judgments given by courts that are designated by such clauses to be recognised and enforced in other contracting states. The contracting states include the EU, Singapore, Mexico and Montenegro. The USA, China and Ukraine have signed the Hague convention but not ratified or acceded to it, and it therefore does not currently apply in those countries.

      Prior to the Transition date, the UK was a contracting party to the Hague convention because it continued to benefit from the EU’s status as a contracting party. The EU acceded on 1 October 2015. By re-depositing the instrument of accession on 28 September 2020, the UK acceded in its own right to the Hague convention on 1 January 2021, thereby ensuring that the Hague convention would continue to apply seamlessly from 1 January 2021.

      As far as types of enforceable orders are concerned, under the Hague convention, the convention applies to final decisions on the merits, but not interim, provisional or protective relief (article 7). Under article 8(3) of the Hague convention, if a foreign judgment is enforceable in the country of origin, it may be enforced in England. However, article 8(3) of the Hague convention allows an English court to postpone or refuse recognition if the foreign judgment is subject to appeal in the country of origin.

      However, there are two major contentious issues with regards to the material and temporal scope of the Hague convention, and the EU’s and UK’s positions differ on those issues. They are likely to provoke litigation in the near future.

      The first area of contention relates to the material scope of the Hague convention: more specifically, what is an ‟exclusive choice of court agreement”?

      Article 1 of the Hague convention provides that the convention only applies to exclusive choice of courts agreements, so the issue of whether a choice of court agreement is ‟exclusive” or not is critical as to whether such convention applies.

      Exclusive choice of court agreements are defined in article 3(a) of the Hague convention as those that designate ‟for the purpose of deciding disputes which have arisen or may arise in connection with a particular legal relationship, the courts of one Contracting state or one or more specific courts of one Contracting state, to the exclusion of the jurisdiction of any other courts”.

      Non-exclusive choice of court agreements are defined in article 22(1) of the The Hague convention as choice of court agreements which designate ‟a court or courts of one or more Contracting states”.

      Although this is a fairly clear distinction for ‟simple” choice of court agreements, ‟asymmetric” or ‟unilateral” agreements are not so easily categorised. These types of jurisdiction agreements are a common feature of English law-governed finance documents, such as the Loan Market Association standard forms. They generally give one contracting party (the lender) the choice of a range of courts in which to sue, while limiting the other party (the borrower) to the courts of a single state (usually, the lender’s home state).

      There are divergent views as to whether asymmetric choice of court agreements are exclusive or non-exclusive for the purposes of the Hague convention. While two English high court judges have expressed the view that choice of court agreements should be regarded as exclusive, within the scope of the Hague convention, the explanatory report accompanying the Hague convention, case law in EU member-states and academic commentary all suggest the opposite.

      This issue will probably be resolved in court, if and when the time comes to decide whether asymmetric or unilateral agreements are deemed to be exclusive choice of court agreements, susceptible to fall within the remit of the Hague convention.

      The second area of contention relates to the temporal scope of the Hague convention: more specifically, when did the Hague convention ‟enter into force” in the UK?

      Pursuant to article 16 of the Hague convention, such convention only applies to exclusive choice of court agreements concluded ‟after its entry into force, for the State of the chosen court”.

      There is a difference of opinion as to the application of the Hague convention to exclusive jurisdiction clauses in favour of UK courts entered into between 1 October 2015 and 1 January 2021, when the UK was a party to the Hague convention by virtue of its EU membership.

      Indeed, while the EU notice states that the Hague convention will only apply between the EU and UK to exclusive choice of court agreements ‟concluded after the convention enters into force in the UK as a party in its own right to the convention” – i.e. from the Transition date; the MoJ guidance sets out that the Hague convention ‟will continue to apply to the UK (without interruption) from its original entry into force date of 1 October 2015”, which is when the EU became a signatory to the convention, at which time the convention also entered into force in the UK by virtue of the UK being a EU member-state.

       

      To conclude, the new regime of enforcement and recognition of EU judgments in the UK, and vice versa, is uncertain and fraught with possible litigation with respect to the scope of application of the Hague convention, at best.

      Therefore, and since these legal issues relating to how to enforce civil and commercial judgments after Brexit are here to stay for the medium term, it is high time for the creative industries to ensure that any dispute arising out of their new contractual agreements are resolved through arbitration.

      Indeed, as explained in our article ‟Alternative dispute resolution in the creative industries, arbitral awards are recognised and enforced by the Convention on the recognition and enforcement of foreign arbitral awards 1958 (the ‟New York convention”). Such convention is unaffected by Brexit and London, the UK capital, is one of the most popular and trusted arbitral seats in the world.

      Until the dust settles, with respect to the recognition and enforcement of EU judgments in the UK, and vice versa, it is wise to resolve any civil or commercial dispute by way of arbitration, to obtain swift, time-effective and cost-effective resolution of matters, while preserving the cross-border relationships, established with your trade partners, between the UK and the European continent.



       

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        Why the UK TuneIn judgments are a return to the dark ages

        Crefovi : 14/04/2021 2:56 pm : Antitrust & competition, Articles, Consumer goods & retail, Copyright litigation, Entertainment & media, Information technology - hardware, software & services, Intellectual property & IP litigation, Internet & digital media, Litigation & dispute resolution, Music law

        What happens when you let some old farts from the UK judiciary, fueled by a doomed Brexit, single-handedly decide the technological future, advances and boon to which UK users should have access to? Well, stupid business choices justified by perfectly elegant and intellectually stimulating legal decisions handed down by old timers on a rampage to make ‟Britain great again”. I am sorry that TuneIn had to pay such a hefty price, on the UK market but, oh boy, it did.

        TuneInAs a daily jogger, I am an early adopter, and fervent user, of radio apps, such as Radio Garden and TuneIn, in order to listen to, in particular, Los Angeles’ radio stations such as KCRW Eclectic 24 and KPFK, while I am practising my daily and morning sport exercises. While at home, I listen to French radio stations such as FIP or Nova, or to LA channels, via Tunein which is accessible on my Sonos home sound systems, software (installed on my two iphones) and speakers.

        However, over the last year or so, I could not help but notice that European radio stations, such as FIP or France Inter, were no longer accessible from either TuneIn station or Sonos Radio station, while I am in the United Kingdom (‟UK”).

        Well, now I know why. Indeed, I read today the 3 latest issues from Music Confidential published by Susan Butler on the ‟TuneIn appellate decision” (sic).

        Intrigued, I decided to delve deeper into this case and gulped (there is no other word) the 47 pages of the Warner Music UK Ltd and Sony Music Entertainment UK Ltd versus TuneIn Inc decision handed down by the High court of justice of England & Wales on 1 November 2019, as well as the 56 pages of the TuneIn Inc versus Warner Music UK Limited and Sony Music Entertainment UK Limited judgment handed down by the Court of appeal on 26 March 2021.

        Whilst I admire the intellectual virtuosity of the first degree judge, Justice Birss, displayed in the above-mentioned first degree decision, as well as the ‟strong hand in a velvet glove” approach favoured by the appeal judge, Justice Arnold, in the appellate judgment, I can only conclude that this exercise in intellectual masturbation by the judiciary has led, yet again, to another castration of a technological product full of creativity, advancement, connectivity to the world and fantastic ubiquity.

        Am I therefore pissed off?

        Yes. Here is why.

        Are you actually saying that TuneIn should ditch internet radio stations which are unlicensed in the UK?

        The ‟modus operandi” of TuneIn is to operate an online platform, website and apps, which provide a service enabling users to access radio stations around the world. The service is called TuneIn Radio.

        It is now available on over 200 platform connected devices, including smart phones, tablets, televisions, car audio systems, smart speakers such as Sonos, and wearable technologies.

        TuneIn Radio has links to over 100,000 radio stations, broadcast by third parties from many different geographic locations around the world. It is monetised through advertising and subscriptions, although the subscription is free for many users of hardware products such as Sonos and Bose sound systems.

        TuneIn Radio is awesome because, like Radio Garden, it allows users to save some radio channels as favourites, offers some curation services as well as some search functions, which a new user may use when he or she does not know what radio stations he or she may like. In addition, TuneIn Radio provides perks such as personalisation of content, collation of station information presented on individual station pages, and artist information set out on dedicated artist pages.

        Even better, until a few years ago, TuneIn Radio offered a recording device, through its Pro app, which also included a curated repertoire of a large number of music internet radio stations.

        As a user, you are therefore blissfully entertained, and your every musical needs catered for, when using the full gamut of TuneIn Radio’s perks and services.

        Well, such users’ bliss was short-lived, however, since the High court decision, confirmed by the 2021 appellate judgment, found that by including internet radio stations which are either unlicensed, such as Capital FM Bangladesh and Urban 96.5 Nigeria, or not compliant with the local neighbouring rights regime, such as Kazakhstan station Gakku FM and Montenegro’s City Radio, TuneIn Radio was infringing under section 20 of the 1988 Copyright, designs and patents act (the ‟Act”) which provides:

        20. Infringement by communication to the public
        (1) The communication to the public of the work is an act restricted by the copyright in—
        (a) a literary, dramatic, musical or artistic work,
        (b) a sound recording or film, or
        (c) a broadcast.

        (2) References in this Part to communication to the public are to communication to the public by electronic transmission, and in relation to a work include—
        (a) the broadcasting of the work;
        (b) the making available to the public of the work by electronic transmission in such a way that members of the public may access it from a place and at a time individually chosen by them.

        So not only those unlicensed and non-compliant internet radio stations are in breach of the right to communicate to the public, but TuneIn Radio is too, since it provides links to those streams.

        Had TuneIn Radio not obtained a warranty from those internet radio stations that they operated lawfully in their home state? God forbid, TuneIn Radio could not rely on such warranty, of course, and the onus was on TuneIn Radio to double-check that such internet radio stations were either licensed or compliant with their local neighbouring rights regime.

        So what is the direct consequence of such stance, taken by the UK High court and Court of appeal? Well, all those internet radio stations become unavailable to the public, in the UK but also probably in other European countries such as the 27 member-states of the European Union (‟EU”), via the TuneIn Radio platforms, websites and apps.

        Indeed, all the reasoning made by Justice Birss, in the first degree case, as well as Justice Arnold, in the appellate case, revolved around article 3 of the EU Information Society Directive (the ‟Directive”), which was transposed into the above-mentioned section 20 of the Act, and the abondant, eye-wateringly complex and excruciatingly intricate related case-law of the Court of Justice of the European Union (‟CJEU”) on the right of communication to the public.

        So, yeah, you bet, this TuneIn case is valid both for the UK (which has now exited the EU via its unwitty Brexit), and the 27 remaining member-states of the EU.

        Therefore, users and customers lose because they cannot listen to all worldwide internet radio streams via TuneIn anymore, as a direct consequence of the UK decisions.

        And it does not stop there! Perish the thought.

        What about those music radio stations which are licensed for a local territory other than the UK, such as VRT Studio Brussel in Belgium, Mix Megapol in Sweden and MavRadio in the USA?

        For these radio stations outside the USA, the countries operate various kinds of remuneration rights regimes and these stations are paying remuneration under these local schemes. The USA operates a statutory licence scheme conditional on paying royalties and the sample radio MavRadio pays those royalties. However, in all of these cases, the relevant body has not granted geographical rights for the UK.

        Ahhh, the UK first degree judgement, confirmed in appeal says, that’s not my problem, my dear sir: TuneIn’s act of communication in relation to those sample radio streams which pay royalties to a body that does not grant geographical rights for the UK, is unlawful, unless licensed by the UK rights holder. Since it is currently not, TuneIn’s actions amount to infringement under above-mentioned section 20 of the Act.

        Therefore, TuneIn has to now remove all this pool of internet radio stations from its platforms, apps and websites too, until it has figured out how to strike a deal with the UK rights holders.

        Probably, TuneIn’s best call is to reach out to the UK neighbouring rights collecting society, PPL, and start the licensing negotiations from there, immediately. Also, TuneIn better cooperate directly with labels Warner and Sony, to strike those licences, now that the UK first degree decision has been confirmed in appeal and since these two claimants ‟account for more than half the market for digital sales of recorded music in the UK and about 43 percent globally” (sic).

        While I can understand that the UK courts would slam TuneIn for not proactively getting a UK neighbouring rights’ licence for its own premium radio stations, made available exclusively to TuneIn’s subscribers, I found it profoundly castrating to make TuneIn’s liable for primary infringement of the right of communication to the public for merely providing streams to unlicensed and non-compliant third party internet radio stations and to third party internet radio stations which do not pay royalties in the UK.

        What about the right of UK and EU users to have access to as much culture, musical experience and knowhow, as possible, even in a geopolitical context where most countries in the world do not care about, and probably don’t even know what are, neighbouring rights?

        This is directly discriminating UK and, probably, all EU listeners and users, because TuneIn will now have to geoblock all its links to non-compliant and unruly streams, which probably constitute at least 50 percent of the 100,000 internet radio stations available on its apps, platforms and websites.

        So Justice Birss and Justice Arnold can now breathe a sigh of relief, at the thought of having saved European neighbouring rights in the face or barbarian non-British cultural invasion, but I am sure that most UK users of TuneIn only have a ‟fuck you” to respond in return, for their ill-advised, technologically-stiffling and Brexitist stance on the matter.

        Now, by using TuneIn Radio, a UK user will only have access to music radio stations which are licensed in the UK by PPL, such as BBC Radio 2, Heart London, Classic FM and Jazz FM. Thank you very much, but we can already access those radio channels on our terrestrial radio sets or on their respective online platforms, from the UK, so what is the added value of TuneIn Radio in the UK now, pray tell?

        So I can’t use the recording service on TuneIn anymore?

        Of course, Justice Birss, and then Justice Arnold, went for the jugular with respect to the recording option by users of TuneIn’s Pro app.

        Indeed, in terms of a user’s use of the recording function, the claimants contended that the Pro app was not just a recording device. It also included a curated repertoire of a large number of music internet radio stations. The purchaser of the Pro app would, reasonably, understand that TuneIne had sold them the Pro app (with its built in recording function) in order to allow them to record audio content offered by the TuneIn Radio service. There was also a point on the degree of control exercised by TuneIn. Only internet radio stations provided by TuneIn could be recorded and TuneIn could disable the record function at a station-by-station level.

        While this TuneIn recording function was a very original, and unique, offered feature, in the competitive world of radio aggregators, the High court decision, confirmed in appeal, swiftly killed it, by finding that ‟TuneIn had authorised the infringements carried out by its users by recording using the Pro app” and therefore ‟TuneIn’s service via the Pro app when the recording function was enabled infringed the claimants’ copyrights under Section 20 of the Act”.

        Even if Justice Arnold allowed the appeal, in his appellant judgment, against the conclusion drawn by the first degree judge, that TuneIn was liable for infringement by communication to the public in relation to the ‟category 1” stations (i.e. the internet radio stations which already are licensed in the UK via PPL) by virtue of providing the Pro app to UK users with the record function enabled, the outcome is the same: off with its head, with respect to the great recording function offered by TuneIn’s Pro app.

        As Susan Butler wisely wrote, in her Music Confidential’s last three issues, ‟in my view, however, that does not mean that (intellectual property) must be disruptive to digital innovation across national borders”. ‟(…) the bad kind of disruption – the costly and destructive kind – seems to occur most often when anyone tries to drag old business models or entities built around old business models into new multi-national digital marketplace. (…) Everyone must become more pliable to truly reshape the market to support true innovation”.

        Well, Susan, with the old farts who handed down the 2019 and then 2021 decisions (check them out on the audio-video recorded hearings here!), count on it.

        Another example of UK splendid and backward looking isolation, my friends: where is my visa to move to Los Angeles asap, please?



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          Crefovi’s take on EFM online 2021: finally, the digital revolution has come to the film industry!

          Crefovi : 18/03/2021 11:28 am : Articles, Copyright litigation, Entertainment & media, Events, Information technology - hardware, software & services, Intellectual property & IP litigation, Internet & digital media, Technology transactions

          Crefovi’s founding and managing partner, Annabelle Gauberti, attended, by way of her MacBookPro, the EFM online 2021 session from 1 to 5 March 2021. What are Crefovi’s key takeaways from the first European film festival and market of the year? Was this online session a success, managing to link buyers and sellers, as well as their respective service providers, together?

          EFM online 2021Distributors’ need for European content to meet the statutory ratios set out in the Audiovisual Media Services Directive (‟AVMSD”)

          As part of its push towards shaping Europe’s digital future, in the digital single market, the European Union (‟EU”) adopted the Audiovisual Media Services Directive (‟AVMSD”) in November 2018.

          This directive had to be transposed by September 2020 into national legislation in the 27 EU member-states. Yet, since only Denmark, Hungary, the Netherlands and Sweden notified transposition measures to the EU, the EU Commission sent formal notices to all the other 23 EU member-states, requesting them to provide further information, in November 2020.

          Be that as it may, the AVMSD is already impacting the buying strategy of distributors and other streaming companies (called ‟streamers” during the EFM online 2021 session).

          Indeed, the AVMSD governs EU-wide coordination of national legislation on all audiovisual media, both traditional TV broadcasts and on-demand services.

          Since one of the goals of this EU coordination, via the AVMSD, is to preserve cultural diversity, each EU member-state is currently figuring out how best to transpose into national law the new obligation, for video on-demand services (which include streamers), to ensure at least a 30 percent share of European content in their catalogues, and to give prominence to such European content. The provisions of the AVMSD also allow, under certain conditions, EU member-states to impose on media service providers that are established in other member-states, obligations to contribute financially to the production of European works. The new obligations do not apply to media service providers with a low turnover or a low audience, in order not to undermine market development and inhibit the entry of new market players.

          So, of course, the likes of Netflix, Amazon Prime, Disney+ are opening their large purses freely, in order to catch the best European titles, and therefore meet the 30 percent share of European works, which is a ‟sine qua non” condition for them to keep on, or start (in the case of Disney+, Hulu, HBO Max), offering their video on-demand services to EU consumers.

          This was a blessing for European film producers, directors and sales agents present at the EFM online 2021 session. Indeed, a lot of key deals were signed at the European Film Market, this year, for European titles such as French work ‟Petite Maman” from Céline Sciamma, Radu Jude’s Golden Bear winner ‟Bad Luck Banging Or Loony Porn” (from Romania), and many more.

          COVID 19’s negative impact on the production stage of film projects and how the UK and French film industry stakeholders rebounded

          There is another reason why current new film content has not met the high demand (for European titles and other international works) in the supply chain. Well, you guessed it, the COVID 19 pandemic is the cause, of course.

          Due to health and safety issues, the logistics of going into the film production stage have, for a while, seemed unsurmountable. Almost all film productions shut down, during the first European lockdown in February to June 2020. Then, everybody took a hold of themselves and went back to work, putting in place extremely stringent health and safety precautionary measures, pre, during and post production, such as:

          • administering PCR COVID test to all above-the-line and below-the-line production staff upon entry in the UK and France, and then on each day of production;
          • mandatory wear of personal protective equipment for all staff other than actors currently filming;
          • keeping the mandatory 2 meters’ apart distanciation rule, between all team members.

          Major talents and film producers would have none of the nonsense that COVID deniers would throw their way, with Tom Cruise going on record for his outburst towards UK film crew members who were flouting social distancing guidelines, on the Leavesden set of the 7th instalment of his ‟Mission: impossible” franchise, in December 2020.

          The panel for EFM online 2021 session, from the British film commission, provides vivid description of how UK film producers and their staff had to adapt, at very short notice, when the pandemic hit in 2020, and how they are regularly reviewing and improving their health and logistics protocols, in order to ensure that they are compliant with the latest health news and information about the virus.

          Also, the cost of insurance went through the roof, for most film productions around the world, making it impossible for many a project to move onto production stage. This disproportionately impacted independent filmmakers, to the point that governments stepped in, such as the UK government issuing a ‟Film & TV production restart scheme” for UK film and TV productions struggling to get insurance for Covid-related costs.

          Of course, at the end of the film supply chain, a major change occurred, thanks to the pandemic: the tyranny, imposed by major film studios and European governments, consisting in forbidding ‟day-and-date” release (i.e. a simultaneous release of a film on multiple platforms – most commonly theatrical and on-demand videos services), dissolved. Cinemas have been closed for a while, now, since March 2020, on-and-off, due to the pandemic-induced lockdown. Therefore, there is a change of paradigm, for film producers and directors, from asking themselves ‟Should we go for a day-and-date release?”, to ‟On which video on-demand service and/or streamer, my film will shine most?”.

          Indeed, die-hard fans of the theatrical window have started to yield, such as film major Universal pictures which released big films on streamers from March 2020 onwards.

          Other major studios have preferred to hold back releasing many big titles indefinitely, such as Wes Anderson’s ‟The French dispatch”, much to the chagrin of end-consumers and fans.

          EFM online 2021: filling the gap for more top-quality content with VFX hacks such as virtual production

          One of the major takeaways from the EFM online 2021 is that, due to this huge demand for content, film professionals need to produce more, faster, at an affordable cost, and in very high production value.

          This is where virtual production is coming, to deliver this faster, smoother and enhanced quality.

          From the moment where the initial upfront cost and investment of acquiring top virtual production tools and material have been incurred, it is a no-brainer: virtual production specialists laude the cost and time savings, as well as agility, induced by this new technology, predicting that every filmmaker will irresistibly move to virtual production in the near future.

          So what is virtual production? Virtual production is the use and incorporation of visual effects (‟VFX”) and technology throughout the production life cycle. While this process is not entirely new, the film industry is now paying much attention to virtual production, because it enhances production planning, increases shooting efficiency and reduces the number of expensive reshoots. Through visualisation, motion capture, hybrid camera, and LED live-action, the virtual production techniques that belong to the toolset of modern content creation are perfectly adapted to a COVID 19-era of film production.

          Potentially, virtual production would allow actors, and crew members, to shoot and work from multiple locations, in a safe environment where they have set up their respective COVID-19 health and safety protocols and bubble.

          The challenge now is for film professionals to jump on the bandwagon and swiftly obtain appropriate training on virtual production and other VFX tools and technologies, so that they can hit the ground running and offer their new much-needed skills to French and UK film productions.

           

          To conclude, while I would have liked all presentations and virtual events to be accessible to all participants, during the EFM online 2021 (festival organisers cannot pretend that the room has a limited number of seats, anymore, right?), I deeply enjoyed the virtual attendance of this film market and festival, getting a lot out of it, from catching up on the latest trends to catching up with our film clients and prospects via Cinando and the online EFM platform. We will be back!



          Crefovi regularly updates its social media channels, such as LinkedinTwitterInstagramYouTube and Facebook. Check our latest news there!




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            Why getting an agent is critical, to make it in the creative industries

            Crefovi : 18/02/2021 12:35 pm : Art law, Articles, Consumer goods & retail, Copyright litigation, Emerging companies, Employment, compensation & benefits, Entertainment & media, Gaming, Intellectual property & IP litigation, Law of luxury goods, Music law, Trademark litigation

            In the creative industries, the talent is often represented by middle men, who reach out to end customers, and find avenues whereby, and marketplaces on which, the products and/or services and skillset of the talent they represent are marketed, sold, distributed, licensed, etc. So, in the art world, these middle men are art galleries and auction houses. In the book publishing sector, these middle men are called literary agents, while in the film industry, those representing the above-the-line talent (actors, directors, writers) are called acting agents and agencies. Even music composers have their own composer agents, with a handful of players in this niche, in France and the United Kingdom (‟UK”). So, why do you need an agent, as a creative? How do you find an agent? How will your relationship with the agent work?

            agent1. Why do you need an agent, as a creative?

            As a creative, as a talent, you have mostly honed your creative skills, be it your painting skills, your sculpting skills, your acting skills, your writing and literary skills, your fashion design skills, etc.

            This is a completely different skill set than the one needed to:

            • getting substantial work in your creative field, relying on smooth marketing tactics, social media and public relations skills;
            • networking with the major players in your creative field, be it the most bankable film directors, the most skilled film producers, the stalwart book publishers, the most wealthy art collectors, the largest fashion brands who will hire you as a model for their catwalk presentations, etc.
            • negotiating sales, licensing, distribution agreements;
            • negotiating service providers agreement to act in a film or write the musical composition and soundtrack to a film;
            • negotiating publishing agreements of a literary work with books publishers and online content providers;
            • managing, in a strategical and optimal manner, the career of the talent, and
            • doing some reputation management work, when and if the career and image of a talent is getting tarnished for some reason.

            Well, in a nutshell, you have the required job description of an agent, set out above!

            This is why you need an agent: because he or she will do all the things mentioned above, for you, in order to enhance your career as a talent, and get you some jobs, some bookings or some sales, depending on what you have to offer.

            Also, there are very low barriers to entry to most creative fields, since everyone can become a player in that field without having to obtain a particular practising license or authorisation from one’s government to become an artist, a book author, a painter, an actor, a film director, etc.

            Indeed, unlike regulated industries, such as the legal profession, the medical profession, the accountancy profession, the banking and finance profession, creatives do not need to pass any stringent test or exam to be granted the right to work their creative jobs.

            Therefore, the gatekeepers in the creative industries are the agents: since it is in their interest to only work with the best talent, they will pick and choose only the most successful and skilled gamers, designers, artists, painters, actors, film directors, writers, models, music composers, etc. to represent.

            So, if you want to be part of the club, in your creative field, and land those big fat contracts, you must find yourself a good agent.

            2. How do you find an agent?

            Most of the time, it is by word of mouth, or through connections that one finds an agent.

            Of course, being an alumni from a prestigious creative school, such as the National Film and Television School (‟NFTS”), in the UK, or the Royal Academy of Dramatic Art (‟RADA”) helps tremendously, especially since agents love mingling with young graduates there, attending their final and graduation presentations and reviewing their final graduation projects, to assess the amount of talent such graduates may have.

            Think Alexander McQueen, the famed, and now deceased, fashion designer who was immediately spotted as a major player among top fashion designers, by the most elitist fashion press, when he presented his MA graduation collection, at his college Saint Martin’s in 1992.

            Having a family member or friend in the business also helps, and there are countless examples of film actors who gave a major push to their offsprings, in France, the UK and the United States (‟US”) by ‟connecting them” to their agents.

            If you are not one for nepotism, then you could also approach and cold-call the best agents for your particular creative field, and present them with your portfolio of works and CV, in the hopes that they will retain you as their client. However, this route is the toughest one, and you will probably get a lot of rejections, if and when you get picked by an agent.

            The web is an excellent source of information to find the best agents in your creative field, in France, the UK and the US.

            For example, on the best articles I have ever read on the highly-secretive agenting business is ‟Le fascinant business des agents de stars”, which dissects the rarified group of famous acting agents in Paris, France.

            3. How will your relationship with the agent work?

            The agenting business is mostly an unregulated one, although France, ever the formalistic one, has put in place some rules and regulations relating to the agenting profession in its labour code and a decree on the remuneration of artistic agents, which caps the agents’ earnings at 10 percent of the gross remunerations paid to the talent.

            The excellent French streaming series, ‟10 pour cent (‟Call my agent” on English streaming channels) gives a great example of what acting agents do, for a mere 10 percent of the actors’ earnings.

            In the UK and the US, there is way more of a ‟laissez-faire” approach to the agenting business, although the UK has some statutory regulations set out in the Employment Agencies Act 1973 and the Employment Businesses Regulations 2003, which set some standards in terms of:

            • providing relevant information and advice to the agents’ clients (i.e. the talent);
            • conducting all affairs on behalf of the agents’ clients, and
            • keeping records, in particular of the contracts and visa application processes, entered into by the agents’ clients during the course of the creative activities.

            UK and US agents usually get 15 percent commissions, although I have seen percentage rates going as high as 50 percent, in the case of art galleries selling consigned art works on behalf of artists they represent.

            These discrepancies in the commission rates, and the various obligations owed by the agent to the talent, are caused by the variance in the provisions set out in the representation agreements entered into between the talent and his or her agent. Since the ‟freedom to contract” principle applies, the terms of the contractual agreements entered into between the parties are left mostly to the freedom of those parties, except for the rare statutory points mentioned above.

            Very often, at our law firm Crefovi, we get approached by creatives who signed very poorly drafted, and very unbalanced, representation agreements with their agents in the past. Therefore, we support them in terminating such agenting agreements, while attempting to recover any earning unpaid to them by these agents.

            Therefore, as a talent, it is always advisable to instruct an entertainment lawyer, in order to review, amend and negotiate the terms of any draft representation agreement sent by the agent, before such talent signs it.

            Also, it is useful to become a member of a trade union for creative practitioners, such as Equity, which may provide you with ongoing career, business and legal advice, along the way.

            If you want to be successful in the arts, you need a top agent in your creative field to represent you. However, an agent is not your friend, but your future business partner, so you need to establish some clear, transparent and fair working conditions with him or her, from the outset. The best way to achieve this is to instruct a seasoned entertainment lawyer, like us at Crefovi, to negotiate such representation agreement for you. Then, it should be plain sailing, a lot of hard work and, hopefully, success and recognition at the end of the line, in your creative field!



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              Monetising copyright in the book publishing industry

              Crefovi : 08/02/2021 1:51 pm : Antitrust & competition, Articles, Copyright litigation, Employment, compensation & benefits, Entertainment & media, Intellectual property & IP litigation, Internet & digital media, Trademark litigation

              During the ‟Lawfully Creative” podcast recorded with Joe DiMona, Crefovi’s founding and managing partner Annabelle Gauberti and Joe briefly discussed how hard it can be, for book authors such as Joe’s late father, Joseph DiMona, to earn a steady income as professional authors. We also queried what the main income sources for book authors were, and how they could be maximised to avoid a ‟peaks and troughs” lifestyle, which has unfortunately come to be associated with a life dedicated to literary works and creativity. Here is Crefovi’s take on income streams for authors and book publishers, in the publishing industry, and how to maximise copyright in the book publishing industry.

              Copyright in the book publishing industry1. Transfer of copyright in the book publishing industry

              The first owner of copyright, in any literary work (i.e. a novel, a biography, a letter, an essay, some lyrics for a song, a film script) is the person who wrote it (leaving aside national legislation, such as the one in the United Kingdom (‟UK”), which gives the employer the copyright in an employee’s work created in the course of employment). Therefore, the first owner of copyright in the book publishing industry, is the author.

              At the international level, copyright in literary works is recognised, and protected, by:

              There are also some national laws, relating to the recognition, and protection, of copyright in literary works, such as:

              Therefore, the first owner of copyright has the exclusive right to do certain restricted acts in relation to his or her literary work, such as to:

              • copy the work (known as the reproduction right);
              • issue copies of the work to the public (known as the distribution right);
              • rent or lend the work to the public (known as the rental and lending rights);
              • perform, show or play the work in public (known as the public performance right);
              • communicate the work to the public (known as the communication right), and
              • make an adaptation of the work, or do any of the above acts in relation to an adaptation of the work (known as the adaptation right),

              which, collectively, are referred to as primary copyright rights.

              Moreover, the first owner of copyright has the right to make a commercial use of his or her literary work, by:

              • importing copies;
              • possessing copies;
              • selling, exhibiting or distributing copies;
              • dealing with items that are used for the making of copies of the literary work, and
              • permitting premises to be used for a performance, or providing apparatus for such performance, of the literary work,

              which, collectively, are referred to as secondary copyright rights.

              Finally, there are personal rights, called moral rights, conferred upon the author of primary copyright works, which are quite distinct from the economic interests in the literary work. There are four moral rights, as follows:

              • Right to paternity: authors of literary works have the right to be identified as such, by requesting that their name be tied, or associated, with the work. In order to benefit, the author must assert his or her right.
              • Right to integrity: this is the right for the author of literary works to object to the derogatory treatment of his or her work, that is, that the work has been added to, altered or deleted in such a way to amount to a distortion, mutilation or otherwise prejudicial treatment. In other words, that is the right to respect his or her creation.
              • Right to disclosure: this is the right for the author to let go of his or her intellectual asset, which then goes from the private sphere to the public space. The author is the sole judge of the moment, and form, of the first communication to the public of his or her literary work.
              • Right to object to attribution: any person has the right for literary works not to be incorrectly attributed to him or her. The attribution may be express, but it can also be implied. Also, the author may, after the publication of his or her literary work, decide to repent and withdraw from the attribution of this literary work. This provides the author with a unilateral right to terminate his or her contractual obligations, and terminate any exploitation of his or her intellectual asset, provided that this author first indemnifies the publisher of the damages and consequences suffered by such publisher, upon termination of exploitation of his or her literary work.

              While the moral rights cannot be transferred from the first owner of copyright of a literary work, to another person, the primary and secondary copyright rights can be transferred to a third party, either temporarily or permanently, as bundles of rights.

              Usually, in the book publishing industry, the author/writer of a manuscript enters into a legal relationship with a publisher in order to publish the work and issue copies of it in sufficient quantities to satisfy the needs of the public.

              The author does this by virtue of a contract in which it either assigns, or grants an exclusive or non-exclusive license, to the publisher. In the case of an assignment, the transfer of copyright is permanent and irreversible, while in the case of a license, the transfer of the copyright in the literary work will terminate, and revert back to the author, on a termination date set out in the license agreement.

              The publishing agreement mainly grants the publisher primary copyrights, such as the rights of reproduction and distribution over a literary work, thus providing the publisher with the legal means necessary to publication.

              However, the publishing agreement often also specifies how secondary and subsidiary rights are to be dealt with. The author may decide to grant the publisher the right to exploit his or her work in other ways, by selling translation rights, for example, or negotiating with a magazine or newspaper to serialize extracts from his or her work, or organising the digital and electronic exploitation of a printed work.

              Sometimes, though, the author and/or his or her agent, will reserve these rights. In these cases, the agent of a successful and widely-known author may have very good contacts with TV and film companies and be better placed to negotiate options or deals directly with them. Or the agent and/or author may prefer to negotiate directly with the best players in the digital and electronic publishing space, rather than leaving an unsophisticated publisher of the print work do these negotiations or even exploit such digital rights.

              Regulation of the contract between the author and publisher is left to national legislation (i.e. the Berne convention and the WIPO treaty do not apply with respect to contracts between authors and publishers). While in some legal traditions there are few, if any, rules on the form and content of that contractual relationship, other countries dispose of detailed legislation on the formalities of the publishing contract and its content, as well as the rights and obligations of the parties and the way the contract ends.

              Indeed, on the one hand, the French IPC sets out several rules which narrowly explain what is allowed, and what is not allowed, in a French law-governed publishing agreement, since the French legislator has always the content creators’ best interests at heart. These are articles L.131-1 to L136-4 IPC.

              On the other hand, the UK CDPA is way more permissive, letting the parties fend for themselves when negotiating their contractual publishing arrangements, except for the obligation to have the license or assignment set out in a written agreement (section 90(3) CDPA) and that any license granted by the author is binding on every successor in title to his or her interest in the copyright (section 90(4) CDPA).

              So, how do book authors get paid? And how much?

              2. Work for hire payments

              The simplest form of payment, of an author, is a fee paid in exchange for work completed – whether it is an article for a magazine, contributions to an encyclopaedia, or a short non-fiction title for children. These ‟work-for-hire” payments are not normally repeated. In other words, it is a one-off fee for a specific job.

              This method almost always applies to artists and photographers providing illustrations (i.e. drawings, pictures) to accompany a publication.

              Additionally, in a ‟work-for-hire” contractual relationship, copyright is often assigned to the publisher, and this transfer of copyright can be a condition of payment.

              More specifically, many professional writers work to a standard range of payments based on the number of words, usually calculated per thousand. The sum per 1,000 words could be, for example, between Euros 200 and Euros 300, though much lower – and higher – figures are common, since the publisher may have to pay more if the writer is an expert in his or her field, or is required to do the work quickly because there is pressure on a deadline.

              Some kinds of publishing projects almost always carry a fixed fee. For example, authors of non-fiction titles for school pupils or children are typically paid a fee for the whole job, and this includes help with finding illustrations or photographs, writing captions, producing a glossary and index, as well as researching and writing the book. Hence, a 32-pages 6,000-words book might earn a fee of Euros 2,500 (a little over Euros 300 per 1,000 words). Writing a film script also carries a fixed fee.

              Usually, fees are paid once only. However, they can also be broken down into staged payments: for example, 25 percent paid on signature of the publishing agreement, 50 percent when the publisher receives an acceptable manuscript and the outstanding 25 percent balance when the additional work (including checking proofs and layout) has been completed. This is cash in hand, paid regardless of how the book sells when it is published.

              The writer, a ‟work-for-hire”, will not normally be paid anything further, even if the title is translated into many different languages.

              Consequently, the gross margin for reprints or translations can be substantially higher than the gross margin of the first print. This is because the writer’s fee and other one-off costs do not recur in the reprint costs.

              3. Royalties

              However, for authors of full-scale works (i.e. novels, essays, poetry books or textbooks), the usual method is to pay a royalty.

              Paying authors a royalty in the form of a percentage of sales revenue can favour publishers in two important ways:

              • First, authors may identify more closely with the progress of their book and will therefore make a greater commitment to its success. Also, publishers may want to build a long-term relationship with their authors in the hope that they will write several books and build on the reputation of their earlier titles, and royalties can contribute to that sense of partnership.
              • Second, paying authors as and when sales revenue is created can support cash flow.

              This royalty takes the form of a ‟pro-rata” percentage based on actual sales of the book. Typically, a novelist may receive a share of the sales price, expressed as a percentage of the local published, or retail, selling price for each copy sold.

              Educational and scientific publishers, however, often pay royalties based on the net sums received (i.e. net receipts) by publishers after discounts to booksellers or retailers.

              There is no such thing as a ‟normal” royalty rate, although many publishers use 10 percent as a reasonable benchmark.

              Authors of consumer titles, particularly those whose agents negotiate the publishing contract, may demand that royalties are paid on the selling price of their book (i.e. ‟recommended retail price”). However, publishers will remind such authors and agents that some sales channels can only be serviced by way of very large discounts. For example, a chain bookstore that takes important quantities of a lead title, holding stock as well as promoting the book in-store, may demand large discounts. So if the publisher pays a 10 percent royalty based on a selling price of Euros 20, but is receiving only Euros 10 in sales revenues, then the Euros 2 payment such publisher is making to the author (10 percent of Euros 20) is, in effect, a 20 percent royalty on the sum received (20 percent of Euros 10). A compromise can be reached, by which the royalty rate is lowered if the discount exceeds a certain level. From a publisher’s standpoint, paying authors on ‟net receipts” means that payments are kept more closely in line with the funds available from actual sales. However, authors reply back that their income should not be dependent on how big a discount the publisher has to make – they should be getting, as much as possible, the same amount on every copy of their book which is sold.

              Royalty accounts for authors are prepared at an agreed time or at regular intervals, for example, every six months, and any payments due remitted after that.

              These royalty payments may have some deductions made. For example, authors may have to pay for any of their own corrections in the proofs that exceed 10 percent of the setting cost. This is partly to discourage them from making last minute changes to the set text (which is an expensive process for the publisher).

              4. Advances

              Publishers will consider paying authors an advance on this royalty, if such authors write for a living.

              This money on account does two things:

              • it is a statement of commitment from the publisher, and
              • it supports the author to live and pay bills and living costs, while writing the book.

              Many authors of educational, business and scientific books do not write for a living. The books, or contributions to publications such as journal articles, represent an important part of their reputations and career advancement, but their main source of income derives from their practice as teachers, researchers, lawyers. Consequently, publishers of books for these sectors seldom pay any advance to such authors.

              An advance is not an additional fee. It is an up-front payment that has to be ‟earned out” (i.e. paid back) before further payments are made. Unearned advances will need to be written down, in the accounts, and will constitute a loss on the ‟Profit and loss” account.

              It is considered wise to only pay an advance that amounts to less than half of that which would be paid in royalties, when the first printing has been sold. Therefore, an advance rarely exceeds half the amount that would have been earned in royalties from a complete sell-out of the first printing.

              Advances are usually paid in stages: for example, 25 percent on signature of the head agreement, 25 percent on delivery of an acceptable and publishable manuscript, and the outstanding 50 percent balance on publication. Authors (and/or their agents) will demand a larger share upfront, while publishers will try to keep their cash by paying the largest portion of the advance nearest to the date when revenue starts to come in to cover that advance. A compromise could be a division into equal shares – a third on signature, a third on acceptance of the manuscript, and a third on publication.

              Large advances paid to celebrity authors can sometimes only be recouped if substantial additional income is derived from sales of film and TV options or serialization rights.

              5. Additional income

              Publishing contracts should specify what share of any additional and subsidiary income the author is going to receive.

              This money may come from translation rights or sales of editions to publishers in another country.

              Large lump sums may come from serialization rights sales to newspapers and magazines, or options on film, TV and broadcasting rights.

              Substantial sums can also come from merchandising rights, based on sales of goods showing famous children’s characters or personalities.

              Often, income derived from sales of subsidiary rights is shared between the publisher and author.

              In other cases, the role of the publisher is solely limited to traditional publishing without further involvement in other forms of exploitation.

              Money received as subsidiary rights income is remitted at the next accounting period, in addition to royalties owed to the author, and is set against any remaining advance or any expenses the author may have incurred.

              6. Monetising copyright in the digital environment

              Dealt with above was the primary agreement between the author and publisher (sometimes called the ‟head contract”), through which the author grants the publisher a license, or assigns his or her rights, to reproduce and distribute a literary work in tangible form (in print or by means of digital copies contained in tangible carriers such as CD-roms).

              However, making the manuscript into a print book, or even an e-book, is by no means the only way in which the potential in a manuscript can be exploited to the mutual financial benefit of author and publisher.

              Depending on the nature of the literary work, the publisher can do much more to take full advantage of the intellectual property entrusted to him, than merely publish a book, especially in the digital economy we live in today. There are many ways of raising secondary income by exploiting the assets represented by the book.

              Indeed, the potential may exist for the book to be serialized in a newspaper or magazine, digitized in whole or in part.

              The rights that enable the publisher to exploit these, and other possibilities, are known as subsidiary rights, one of the most commonly used of which is the right to reprographic reproduction, or the making of a photocopy.

              Crucially important in the digital era, are the electronic version/publishing rights because more and more print books are also published as e-books, and the mechanical reproduction rights (i.e. audio and video rights) because more and more print books are also published as audio books (even Spotify is diversifying further outside music with audiobooks).

              When the head contract is an assignment, the author assigns copyright to the publisher and therefore he or she transfers permanently over to the publisher the entire bundle of rights (subsidiary rights included), which the publisher is free to exploit, or not. Therefore, often, an assignment means the author receives no share of any subsidiary rights income. However, in some cases, the publisher will be obliged to pay the author his or her share of the financial rewards of such exploitation. The head agreement will then need to stipulate the proportion paid to the author, on the one hand, and to the publisher, on the other hand, with respect to this exploitation of subsidiary rights. For example, the split could be 50/50 and if so, the clause in the contract setting this out would be known as the ‟half profits clause”.

              When, however, the head agreement is an exclusive license, rather than an assignment, author and publisher are at liberty to negotiate the grant of rights – including the management of subsidiary rights. If the author authorises the publisher to exploit any or all of the subsidiary rights on his or her behalf, he or she will also determine in the contract the proportions in which the proceeds from the sale of these rights are to be divided.

              7. Collective administration of copyright in the book publishing industry

              To a large extent, the relationships in the book publishing industry are traditionally managed on an individual, or rather on a one-to-one basis, between the author and the publisher.

              Yet, the increasingly widespread use of the photocopier has led to an explosion of the unauthorised reproduction of printed works.

              As copying takes place everywhere and by everybody, it is a massive use of intellectual property which, if unauthorised and unpaid, represents huge losses to right holders. However, seeking permissions for every individual act of copying is materially impossible.

              Consequently, rights holders mandate organisations to manage their rights collectively. Such organisations issue licenses for the reproduction of literary works. These licenses permit copying only of extracts, and are not substitute for the purchase of a book. These organisations collect the fees and channel them back to the authors and publishers. In the case of literary works, such collecting societies are known as Reproduction Rights Organisations (‟RROs”).

              RROs exist in some 50 countries around the world, and are linked by their umbrella organisation, the International federation of reproduction rights organisations (‟IFRRO”).

              For example, the Copyright Licensing Agency Ltd (‟CLA”) and NLA Media Access Limited (‟NLA”) are the two UK RROs, while the Centre Français d’exploitation du droit de Copie” (‟CFC”), the Société des Editeurs et Auteurs de Musique” (‟SEAM”) and the ‟Société Française des Intérêts des Auteurs de l’Ecrit” (‟SOFIA”) are the three French RROs.

              Further links, indeed a network of rights and obligations, stem from the bilateral agreements that RROs conclude between each other so that, for example, when a license is granted in France for a work published in the UK, the French RRO transmits the fees collected to the UK RRO, which disburses them as royalties to UK right holders. And vice versa.

              In a voluntary system, such as in the UK, the RRO gets its authority from the mandates of its participating rights holders, which means that its repertoire could be limited by the exclusion of non-participating publishers or authors. In this case, users would still need to apply directly to rights holders in respect of excluded works.

              In other countries, such as in France, the national legislation supports collective management, and deals with the problem of non-represented rights holders by stipulating that, where an agreement is concluded, it covers the works of both represented and non-represented rights holders. This is an extended collective license, which creates compulsory collective management. The French RRO therefore collect royalties on behalf of participating and non-participating publishers and authors, and then distribute such royalties to all of them.

              In certain countries, such as in France, a legal, or statutory, license, means that although rights holders cannot prohibit the use of their material (under limitations of private use), they have the right to be remunerated for that use. This regime is therefore based on the existence of a copyright limitation that allows reproduction for private use, which takes place in a private sphere, on a non-commercial scale and from a legitimate source. Remuneration may take the form of a fee negotiated by rights holders and users, or ir may be set by law. In some cases, the legislation finds an indirect way to generate remuneration, by imposing a levy on copying equipment.

              Remuneration for reprography is part of the publishers’ return on their investment and creates revenue streams that enable them to bring new products to the marketplace. Moreover, even when a book is out of print and a return no longer accrues to the publisher, or royalties to the author, revenue streams from licenses may continue to flow. This applies equally to back issues of journals, magazines, and backlists of book publishers.

              Some RROs, such as the UK RROs NLA and CLA, and the French RRO CFC, have been mandated to manage reproduction in the digital environment. In this case, RROs need to be authorised to exercise this right on behalf of creative workers, when their mandate includes digital rights. It covers the transmission of content over the internet.

              Public performance rights (such as poetry readings) can also be managed by RROs. Some RROs are also authorised to administer mechanical reproduction rights such as the licensing of audio books. However, in France and the UK, such public performance rights and mechanical reproduction rights are not directly managed by French and UK RROs, so it is the respective syndication offices of French and UK publishers who deal with the management of those rights.

              In France, CFC manages exclusively the royalties on reprography (both for photocopy and digital reproduction), on behalf of all French publishers, while SOFIA manages the royalties collected on the right to borrow and lend books, on behalf of all French authors and publishers.

              In the UK, NLA manages the royalties on reprography rights, lending rights as well as the reproduction rights in the digital environment on behalf of its registered magazines and newspapers. CLA covers royalties on reprography rights, lending rights as well as reproduction rights in the digital environment, on behalf of its registered book publishers and certain registered magazines.

              The future is bright for book authors and publishers who know how to make the most of their copyright, and we, at Crefovi, are here if you need a hand in maximising income streams from your portfolio of copyright and other intangible assets!



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                How to remedy a breach of license which term is overran?

                Crefovi : 27/11/2020 12:43 pm : Antitrust & competition, Articles, Consumer goods & retail, Copyright litigation, Emerging companies, Entertainment & media, Fashion law, Gaming, Hospitality, Information technology - hardware, software & services, Intellectual property & IP litigation, Internet & digital media, Law of luxury goods, Life sciences, Litigation & dispute resolution, Technology transactions, Trademark litigation

                In the creative industries, many intellectual property rights, such as copyright, trademarks, registered designs and patents, are subjected to licenses, in order for right owners and creators to monetize such rights. However, things do not always go smoothly during and after the term of the licensing agreement, between the licensor and the licensee. Therefore, what are the remedies that the licensor may put in place, in order to ensure that his or her intellectual property rights are fairly monetised? How to remedy a breach of license which term is overran?

                How to remedy a breach of license which term is overran?1. What is a license agreement?

                A license is the contract which authorises the use of a certain intellectual property right (‟IPRs”), be it copyright, a trademark, a design or a patent, for commercial purposes, by a licensee, in exchange for the payment of royalties to the licensor, i.e. the right owner. These royalties are usually computed as a percentage of the turnover generated by the sale of products manufactured, or services provided, by the licensee under this license agreement.

                A license is different from an assignment agreement, in that the former has a limited term, whereby the authorisation to use the IPRs granted to the licensee by the licensor will expire, after a period of time explicitly set out in the license agreement. On the contrary, an assignment is a perpetual and irreversible transfer of ownership of some designated IPRs, from the assignor to the assignee, in exchange for the payment of a consideration (usually, a one-off sum of money).

                To resume, a license is temporary and reversible upon expiry of a term, while an assignment is irrevocable and irreversible if made for consideration.

                2. How are licenses used in the creative industries?

                Licenses are often used in the creative industries, in order for creatives to monetise the IPRs that they created.

                For example, in the music industry, many copyright licenses are entered into, in order for music distributors to distribute the masters of sound recordings to new territories, which are difficult to reach for the music label which owns such masters because this label is located in a totally different geographical area. Therefore, the licensor, the music label, relies on the expertise of the local licensee, the national distributor, to put in place the best local strategy to broadcast the masters of its sound recordings, via radio plays, local streaming websites, TV broadcasting, and then to generate revenues through these various income streams and local neighbouring rights collecting societies.

                Another example of a copyright license, in the fashion and luxury sectors, is when a brand commissions an artist or designer to make some drawings and designs, which the brand will then display on its website(s), as well as in its various stores. These drawings and designs being protected by copyright, the brand, as licensee, will enter into a license agreement with the artist, as licensor, to obtain the right to use these drawings and designs in set locations and premises of this brand.

                Licenses are also extremely widely used in the context of trademarks, especially with respect to distribution of luxury and fashion products on new geographical territories by local distributors (who need to have the right to use the trademark to advertise, market and open retail locations), and also with respect to deals where the licensee manufactures products in which it has a lot of expertise (such as perfumes, cosmetics, children’s garments), which the licensee then sells under the trademark of a famous fashion or luxury brand, i.e. the licensor.

                In the technology sector, patent and/or copyright licenses are the norm. Indeed, softwares and sources codes are protected by copyright, so many tech companies make a living licensing their copyright into such inventions, to their retail or business customers, in exchange for some royalties and/or licensing fees. As far as technological products are concerned, those can be protected by patents, provided that they are novel, that an inventive step was present in creating such products, and that the invention is capable of industrial application. Therefore, most technological hardware products, such as mobile phones, computers, tablets, are protected by patents. And whenever there is a dichotomy between the creator of these products, and the manufacturers and distributors of such products, then some patent license agreements are entered into.

                Technology licenses are, indeed, so critical, that fair, reasonable and non-discriminatory terms (‟FRAND”) have been set up in order to level the playing field: FRAND terms denote a voluntary licensing commitment that standards organisations often request from the owner of an IPR (usually a patent) which is, or may become, essential to practice a technical standard. One of the most common policies, is for the standard- setting organisation to require from a patent holder that it voluntarily agrees to include its patented technology in the standard, by licensing that technology on FRAND terms. Failing or refusing to license IPRs on FRAND terms could even be deemed to infringe antitrust rules, in particular those of the European Union (‟EU”). For example, the EU commission sent a statement of objections to Motorola Mobility, for breach of EU antitrust rules, over its attempt to enforce a patent infringement injunction against Apple in Germany. The patents in question relate to GPRS, a part of the GSM standard, which is used to make mobile phone calls. Motorola accepted that these patents were standard essential patents and had, therefore, agreed that they would be licensed to Apple on FRAND terms. However, in 2011, Motorola tried to take out, and enforce, a patent infringement injunction against Apple in Germany, based on those patents, even although Apple had said that it was willing to pay royalties, to use the patented technology. Samsung was also the recipient of a statement of objections from the EU commission, after it sought patent infringement injunctions to ‟prevent Apple from infringing patents”, despite Apple apparently being willing to pay a license fee and negotiate a license on FRAND terms.

                3. How to remedy a breach of license which term is overran: what to do if the license has expired but your licensee keeps on using your IPRs?

                Due to poor management and in-house record-keeping, as well as human resources disorganisation and high turnover rate of staff, the licensee may breach the licensing agreement by keeping on using the licensed IPR, although the license agreement has reached its term.

                For example, in the above-mentioned case of the copyright license on some masters of sound recordings, the French local distributors and licensees of such masters overran the term of the license and kept on collecting royalties and revenues on those masters, in particular from French neighbouring rights collecting societies, well after the date of termination of this license. How, on earth, could have this happened? Well, as I experienced first hand at the music trade show Midem, many music distributors, labels and catalogues’ owners, such as music publishers, often mingle together in order to buy and sell to each other music catalogues, be it of copyrighted musical compositions and lyrics, or of copyrighted masters of sound recordings. Therefore, the terms of the first license agreement, between the licensor and the initial first licensee, become more and more blurry and forgotten, with basic provisions, such as the duration of the initial license, being conveniently lost into oblivion by the generation of successive licensees. Yes, I guarantee you, it happens very often.

                Another example, relating to the above-mentioned case of a copyright license granted by an artist, on his drawings and designs commissioned by a luxury brand, which used these drawings on its website(s) and stores, in order to promote its luxury products … even after the termination date of the license!

                So what can a licensor do, when he or she notices that the licensee has, or is, breaching the terms of the license agreement by overrunning its duration? How to remedy a breach of license which term is overran?

                First and foremost, the licensor must gather as much pieces of evidence as possible of such breach of the term of the license agreement, by the licensee. For example, the music label, licensor, may reach out to French neighbouring rights collecting societies and ask for the royalties statements for the French distributor, ex-licensee, up-to-date, in order to have some indisputable evidence that this ex-licensee kept on collecting the neighbouring rights royalties on the sound recordings which were the subject of the license, even after the termination date of this license. The French artist, whose designs and drawings kept on being used by the luxury brand after the term of his license with this brand expired, instructed our law firm to liaise with a French bailiff, in order to have this bailiff execute a detailed report of copyright infringement on internet, by taking snapshots of the webpages of this brand’s website displaying his drawings and designs.

                These pieces of evidence are indispensable, in order to prove the IPR infringement (since the license expired), to show it to the ex-licensee, if necessary, and to use it in any future lawsuit for IPR infringement lodged with a local court, if and when the ex-licensee refuses to settle further to receiving the ex-licensor’s letter before court action.

                You will have guessed by now that, indeed, once the ex-licensor has gathered as much conclusive evidence as possible that his or her IPR is being infringed by the ex-licensee because the latter keeps on using such IPR outside the contractual framework of the now-expired license agreement, the second stage is to instruct counsel, in the country where such IPR infringement is taking place, and have such counsel send a robust, cordial yet frank letter before court action to the ex-licensor, asking:

                • for the immediate cessation of any IPR infringement act, by stopping using the IPR at once;
                • for the evidence of, and information about, turnover and sales, relating to the sale of products and/or services, generated thanks to the use of the IPR beyond the term of the expired license, and
                • for the restitution of all those revenues generated by the sale of those products and/or services, generated thanks to the use of the IPR beyond the term of the expired license, as well as accrued late payment interests at the statutory interest rate,

                within a short deadline (usually, no longer than 14 days).

                Here, the ex-licensee has an option: either it decides to cave in and avoid a tarnished reputation by immediately complying with the terms of the ex-licensor’s letter before court action, or it may decide to act as a blowhard and ignore the requests set out in this letter. The first approach is favoured by anglo-saxon companies, while the second option is usual among French, and all other Mediterranean, ex-licensees.

                If the dispute may be resolved out-of-court, a settlement agreement will be drafted, negotiated and finalised, by the lawyers advising the ex-licensor and the ex-licensee, which will provide for the restitution of a very clearly defined sum of money, representing the sales generated by the ex-licensee during the period in which it overran the use of the litigious IPR.

                If the dispute cannot be resolved out-of-court, then the ex-licensor will have no other option left than to lodge a lawsuit for IPR infringement against the ex-licensee, which – provided the former has strong evidence of such breach of licensing agreement – it will won.

                Once the slate is clean again, i.e. after the ex-licensee has paid damages or restituted sums to the ex-licensor with respect to its use of the IPR after the termination date of the first license agreement, then ex-licensor and the ex-licensee may decide to resume doing business together. Here, I strongly advise that the parties draft a transparent, clear and straightforward new license agreement, which clearly sets out the termination date of this new future license, and foreseeable consequences in case the future licensee keeps on using the IPR beyond the end of such termination date. Using the services of either in-house lawyer or external counsel is very much advisable, in this instance, in order to avoid a repeat of the messy and damaging business situation which occured in the first place, between the licensor and the licensee.



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                  Royalties collected on sound recording performance rights: how to distribute them in the right way

                  Crefovi : 28/10/2020 8:00 am : Antitrust & competition, Articles, Copyright litigation, Entertainment & media, Intellectual property & IP litigation, Internet & digital media, Litigation & dispute resolution, Music law

                  On 8 September 2020, the Court of Justice of the European Union (‟CJEU”) handed down a judgment which may have a groundbreaking effect on how European Union (‟EU”) collecting societies for music copyright, as well as EU music neighbouring rights collecting societies, distribute royalties collected on sound recording performance rights. This has stirred up controversy, with EU music performers, songwriters, composers, publishers and session musicians, crying foul, lamenting their future loss of income, as a direct consequence of this judgment. What happened exactly? Why are these EU music stakeholders up in arms? Is their reaction appropriate, in view of how royalties collected on sound recording performance rights are distributed, by non-EU collecting societies?

                  Royalties collected on sound recording performance rights1. The CJEU judgment places ‟fairness” above the principle of reciprocity

                  The dispute debated about, in the CJEU judgment dated 8 September 2020 (the ‟Judgment”), revolves around monies collected by the Irish neighbouring rights’ collecting society, Phonographic Performance Ireland (‟PPI”) and whether such monies are and, if not, should be, distributed back to all performers, including performers who are nationals in, or residents of, states located outside the EU (‟Third states”).

                  Indeed, PPI’s practice is that performers who are residents of, or nationals in, Third states, and whose performances come from sound recordings carried out in Third states, are not entitled to receive a share of the fees that become payable when those performances are played in Ireland. According to PPI, this regime is perfectly compliant with the provisions set out in Directive 2006/115/EC of the European Parliament and the council of 12 December 2006 on rental right and lending right and on certain rights related to copyright in the field of intellectual property (‟Directive 2006/115”) and the international agreements to which Directive 2006/115 refers, such as the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations concluded in Rome on 26 October 1961 (the ‟Rome convention”) and the WIPO performances and phonograms treaty (‟WPPT”) signed in 1996.

                  According to PPI, to pay those performers from Third states for the use in Ireland of phonograms to which they have contributed, would fail to have regard to the approach of international reciprocity legitimately adopted by Ireland. In particular, if PPI was to pay those performers a share of the above-mentioned fees, performers from the United States of America (‟USA”) would be paid in Ireland even though that Third state grants Irish performers the right to equitable remuneration only to a very limited extent.

                  Here, I need to clarify this point about the USA not reciprocating in paying Irish (and all other EU residents and nationals) performers a share of the fees that become payable when the performances of these EU performers are played in the USA. As explained at length in my article on ‟Neighbouring rights in the digital era: how the music industry can cash in”, while the USA is the main market for neighbouring rights, the collection of such rights is limited to the public performance of sound recordings on digital medium only (such as online radio like Pandora, satellite broadcasting like Sirius/XM and online streaming of terrestrial radio transmission like iHeartRadio). Unlike most of the world, the USA does not apply sound recordings performance rights to broadcast radio, terrestrial radio and performance of sound recordings in bars, restaurants or other public places. Therefore, the pool on which royalties of sound recording performance rights are collected is much smaller, in the USA, than the pool on which royalties of sound recording performance rights are collected, in the EU.

                  In the Judgment, the High Court of Ireland, which had decided to stay the proceedings between the parties in order to ask for a referral to the CJEU, asked the latter to answer four questions. Only the fourth question is relevant to the topic of this article, as follows:

                  Is it permissible in any circumstances to confine the right to equitable remuneration to the producers of a sound recording, i.e. to deny the right to the performers whose performances have been fixed in that sound recording?”.

                  This wording is fuzzy at best, so here is the key legal question asked by the Irish High Court, in plain English: is it compliant with the provisions of Directive 2006/115, the Rome convention and the WPPT for a EU neighbouring rights collecting society to refrain from paying any share of the fees that became payable, when performances coming from sound recordings carried out in Third states, by performers who are residents or nationals of Thirds states, are played in the EU?

                  The short answer, set out with much flourish in the Judgment, is no. It’s not because US neighbouring rights collecting societies cannot pay a share of the fees on performances coming from sound recordings carried out in the EU, by performers who are residents or nationals of the EU, from sources such as broadcast radio, terrestrial radio, bars, restaurants and other US public places, that the EU collecting societies can retaliate by withholding all royalties that THEY collect on EU performances coming from sound recordings carried out in the USA, by performers who are residents or nationals of the USA. According to the CJEU, there is no justification to do that, in any provisions set out in the Directive 2006/115 and/or the Rome convention and WPPT. The principle of equitable remuneration must prevail, for all performers involved, wherever they come from, in the world.

                  2. Why do EU performers and collecting societies lost their cool, when made aware of the Judgment?

                  Across Continental Europe and Latin America, there is a long-established practice for collecting management societies (i.e. music copyright collecting societies and neighbouring rights societies) (‟CMOs”) to deduct amounts, from the monies they collect from the use of music, with an intention to spend those deducted sums on social and cultural purposes, such as aid.

                  And where do these EU collecting societies derive the main of their income for ‟aid” and other ‟cultural” and ‟social” purposes from, mainly? Well, from the undistributed share of the fees on EU performances coming from sound recordings carried out in the USA, by performers who are residents or nationals of the USA, of course!

                  So, for example, French performers’ neighbouring rights society ADAMI, expects that, as a direct consequence of the Judgment, its ‟aid” budgets are going to decrease by 35 percent, with annual ‟losses” valued between Euros12 million and Euros15 million, while French non-featured musicians and vocalists’ neighbouring rights society SPEDIDAM has publicly announced a decrease of 30 percent of its ‟aid” budgets, with a freeze on all allocated grants to boot. According to Irma, between Euros25 million to Euros30 million of ‟aids” and ‟grants” are directly threatened this year, in France.

                  As set out in La Lettre du Musicien, ‟it is the whole ecosystem of the (EU) creation that has been struck, which is the last straw for a sector which already had to contend with an almost total alt to its activities (due to the lockdown caused by the COVID 19 pandemic)”.

                  The bill could be even more difficult to foot, EU CMOs say, if the Judgment was deemed to have a retroactive effect, which may imply that payments in arrears could be in the region of Euros140 million.

                  However, the Judgment is in line with the European Commission’s work to promote the EU’s digital economy, which is aligned with the Anglo-American approach to collecting music royalties (i.e. promoting the author’s creativity, through his/her copyright and neighbouring rights, for the benefit of the public, therefore, in more economic terms).

                  Indeed, the Directive 2014/26/EU on collective rights management and multi-territorial licensing of rights in musical works for online uses (the ‟Directive 2014/26”) was adopted in order to reign in EU CMOs, and impose more rigour and transparency, as well as enhanced accountability and intra-EU competition, in a shambolic and deeply flawed EU-based CMOs landscape.

                  As far as deductions for social, cultural or educational purposes are concerned, the Directive 2014/26 sets out that:

                  • EU member-states must ensure that where a rightholder authorises an EU CMO to manage his/her rights (such as a songwriter, composer, performer, producer, label, publisher, session musician), this EU CMO is required to provide this rightholder with information on management fees and ‟other deductions”, from the rights revenue, before obtaining his/her consent to managing the rights, and
                  • EU member-states must ensure that an EU CMO does not make deductions, other than for management fees, from the rights revenue generated by the rights it manages for other CMOs (‟derived from the rights it manages on the basis of representation agreements”), unless these other CMOs to these agreements ‟expressly consent to such deductions”.

                  The problem is that, in pragmatic terms, many EU CMOs, in particular those from Continental Europe, fail to comply with national laws which transposed the Directive 2014/26, in this respect. Multiple EU CMOs completely ignore requests, made by either rightowners or other CMOs, to no longer deduct any amounts for social or cultural purposes, from the amounts due to the rightowners or other CMOs (the latter being a party to a representation agreement with the EU CMOs).

                  Anyway, by 10 April 2021, the European Commission will have to release a report assessing how the provisions of the Directive 2014/26 have been applied by EU member-states and EU CMOs, which will then be submitted to the European Parliament and European Council. That report shall include an assessment of the impact of the Directive 2014/26 on the development of cross-border services and on the relations between CMOs and users and on the operation in the EU of CMOs established outside the EU, and, if necessary, on the need for a review. The European Commission’s report shall be accompanied, if appropriate, by a legislative proposal.

                  Therefore, I bet that the European Commission will mention, in its upcoming 2021 report, the fact that EU legislation needs to be clarified, so that EU CMOs must pay performers from Third states, their share on EU performances coming from sound recordings carried out in Third states, by performers who are residents or nationals of the Third states, in compliance with the Judgment.

                  3. What’s going to happen now, in the USA, knowing that EU CMOs must pay royalties collected on sound recording performance rights to US performers, from now on?

                  Of course, the US recording industry had become increasingly vocal about the EU payment limitations debated in the Judgment in recent years, especially since neighbouring rights have become such a critical portion of music stakeholders’ total annual revenues.

                  SoundExchange, the US organisation responsible for distributing royalties collected on sound recording performance rights, was leading the charge, arguing that it is unfair and an incorrect interpretation of global copyright and neighbouring rights treaties.

                  Once the Judgment was handed down, SoundExchange exulted, releasing a statement praising ‟equal treatment” for creators, and setting out that the unfair treatment in question ‟denies US music creators an estimated USD330 million in direct global royalty payments a year”.

                  Yes, well, ‟equal treatment” my foot! SoundExchange conveniently avoids dealing with the elephant in the room, which is that the USA must now immediately change its obsolete collecting management system, by widening the pool of sound recording performance collections to US monetary sources such as broadcast radio, terrestrial radio, bars, restaurants and other US public places.

                  If the USA does not start reciprocating, by paying all sound recording performance royalties to EU performers, derived from all acceptable income sources, including broadcast radio, terrestrial radio, bars, restaurants and other US public places, I guarantee that a USA-EU cultural trade war is going to spring out, sharpish.

                  EU CMOs must lobby hard and join forces, with US music stakeholders who have everything to win, in widening the pool of sound recording performance rights from which royalties are collected in the USA. US performers and artists will be of course on board, but they do not have much gravitas, all by themselves. SoundExchange seems like the best ally to EU CMOs, in this battle, but I am under the impression that SoundExchange does not want to rock the boat, what with US telecommunication behemoths and streaming and other tech companies to contend with, and a SoundExchange board of directors rife with top brass and lawyers on the payroll of these various US media and tech conglomerates.

                   

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                    Cancel culture: how the creative industries should ride out the storm

                    Crefovi : 19/09/2020 11:29 am : Art law, Articles, Consumer goods & retail, Copyright litigation, Emerging companies, Employment, compensation & benefits, Entertainment & media, Gaming, Intellectual property & IP litigation, Internet & digital media, Law of luxury goods, Litigation & dispute resolution, Music law, Trademark litigation

                    Cancel culture is upon us. This is what we are currently being told by British and French mass media, who have finally caught up with the content of the latest, and first non-fictional, book ever published by acclaimed, yet heavily criticised, American author Bret Easton Ellis, ‟White”. The polemic rages on both sides of the pond, ignited by more than 150 public figures signing a controversial letter denouncing cancel culture. So, what’s going on? What is ‟cancel culture”? Why should you pay attention to, and be cautious about it, as a creative professional? Is this even a thing in Europe and, in particular, in France and the United Kingdom? If so, how should you position yourself, as a creative, on, and about, cancel culture?

                    Cancel culture1. What is it? Where does it come from?

                    Following the 1990s’ culture wars, which sprung up in the United States of America as a way of denouncing and forbidding contemporary art exhibitions and other medium of creative expression judged by those instigating such culture wars as indecent and obscene, ‟cancel culture” has taken off in the early 2000s on social media, and has since become a cultural phenomenon in the USA and Canada – especially in the last five years or so – pervading every aspect of Northern America’s mass media.

                    ‟Cancel culture” refers to the popular desire, and practice, of withdrawing support for (i.e. cancelling) public figures, communities or corporations, after they have done or said something considered objectionable or offensive. ‟Cancel culture” is generally performed on social media, in the form of group online shaming.

                    Therefore, as a result of something said or done, which triggered negative reactions and emotions such as anger, disgust, annoyance and hate from some members of the public, a natural person or legal entity or group of natural persons ends up being publicly shamed and humiliated, on internet, via social media platforms (such as Twitter, Facebook and Instagram) and/or more localised media (such as email groups). Online shaming takes many forms, including call-outs, cancellation or cancel culture, doxing, negative reviews, and revenge porn.

                    While the culture wars of the 1990s were driven by right-wing religious and conservative individuals in the US (triggered by ‟hot-button” defining issues such as abortion, gun politics, separation of church and state, privacy, recreational drug use, homosexuality), the cancel culture of our 21st century is actually a left-leaning supposedly ‟progressive” identity movement which has taken hold in recent years due to the conversations prompted by #MeToo and other movements that demand greater accountability from public figures. According to the website Merriam-Webster, ‟the term has been credited to black users of Twitter, where it has been used as a hashtag. As troubling information comes to light regarding celebrities who were once popular, such as Bill Cosby, Michael Jackson, Roseanne Barr and Louis C.K. – so come calls to cancel such figures”.

                    Yep. Check out your Twitter feed by typing in the search bar the hashtags #cancelled, #cancel or #cancel[then name of the individual, company, organisation you think might be cancelled], and you will be able to review the top current cancellation campaigns and movements launched against Netflix, British actress Millie Bobby Brown, twitter user @GoatPancakes_, etc.

                    So under the guise of defending laudable causes such as the recognition of the LGBTQ community and fighting against racism, sexism, sexual assault, homophobia, transphobia, etc., some communities of online ‟righteous” vigilante use violent methods, such as cancellation, in order to administer a virtual punishment to those who are on their radar.

                    This call-out and cancel culture is becoming so pervasive and effective that people lose their jobs over a tweet, some upsetting jokes or inappropriate remarks.

                    The Roseanne Barr’s story is the ultimate cancellation example, since her ABC show, ‟Roseanne”, was terminated with immediate effect, after Ms Barr posted a tweet about Valerie Jarrett, an African-American woman who was a senior advisor to Barack Obama throughout his presidency and considered one of his most influential aides. R. Barr wrote, in her litigious tweet, if the ‟muslim brotherhood & planet of the apes had a baby = vj”. Whilst Ms Barr’s remark was undoubtedly in extreme bad taste, it is fair to ask whether her tweet – which could have easily been deleted from Twitter to remove such kick well below the belt dealt to Ms Jarrett – justified wrecking Ms Barr’s long-lasting entertainment and broadcasting career in one instant, permanently and for eternity.

                    To conclude, social media channels have become the platforms of virtual trials, where justice (i.e. cancellation) is administered in an expeditious manner, with no possibility of dialogue, forgiveness and/or statute of limitation. This arbitrary mass justice movement is not only cruel, but tends to put everything under the same umbrella, indiscriminately: so a person who cracked a sexist joke on Twitter would become vilified and even ‟cancelled”, in the same manner than an individual effectively sentenced for sexual assault by an actual court of justice.

                    How did we get to this point? Why does a growing number of Northern Americans feel the uncontrollable need to call-out, cancel and violently pillory some of their public figures, corporations and communities?

                    A pertinent analysis, although skewed by a European perspective, is that made by French sociologist Nathalie Heinich in French newspaper Le Monde and explained on the podcast ‟Histoire d’Amériques”, dedicated to Bret Easton Ellis’ ‟White”.

                    According to Ms Heinich, there is no legal limitation to freedom of speech – a personal liberty which is enshrined in the first amendment to the US constitution, in the USA. As a consequence, the US congress cannot adopt laws which may limit or curb freedom of expression, as is set out in this first amendment. Therefore, according to N. Heinich, since the US authorities cannot forbid speech and freedom of expression, it is down to US citizens to take on the role of vigilante and organise spectacular information and public campaigns, in order to request the prohibition of such expression and such speech.

                    This analysis made by this French sociologist needs to be nuanced: whilst it is true that no US statute or law may curtail freedom of speech in the USA, there is consistent and ample body of case law and common law, which rule on the categories of speech that are given lesser or no protection by the first amendment of the Bill of rights. Those exceptions include:

                    • incitement (i.e. the advocacy of the use of force when it is directed to inciting or producing imminent lawless action, Brandenburg v Ohio (1969));
                    • incitement to suicide (in 2017, a juvenile court in Massachusetts, USA, ruled that repeatedly encouraging someone to complete suicide was not protected by the first amendment);
                    • false statement of fact and defamation (Gertz v Robert Welch, Inc. (1974));
                    • obscenity (Miller v California (1973) established the Miller test whereby speech is unprotected if ‟the average person, applying contemporary community standards, would find that the subject or work in question, taken as a whole, appeals to the prurient interest”, and ‟the work depicts or describes, in a patently offensive way, sexual conduct or excretory functions specifically defined by applicable state law”, and ‟the work, taken as a whole, lacks serious literary, artistic, political or scientific value”), and
                    • child pornography (New York v. Ferber (1982) which ruled that if speech or expression is classified under the child pornography exception at all, it becomes unprotected).

                    Therefore, there are some common law exceptions to the first amendment consecrating freedom of speech in the USA, but they are few and far between, and they need to be hotly, and expensively, debated in court, probably months or years after the triggering content was made available in the public space in the first instance, before being found, by a court, unprotected by freedom of speech, in favour of higher public policy interests.

                    As a result, many American and Canadian citizens resort to violent tactics, in order to request the immediate, swiftly-enforced and free of legal fees and court fees, prohibition of controversial art exhibitions, entertainment shows, movies, jokes, remarks, etc. first through the 1990s culture wars, and now through the 21st century’s cancel culture.

                    This is paradoxical since cancel culture and call-out culture are some of the tools used to advocate for worthy causes such as fighting against racism, sexism, sexual predation and aggression, promoting LGBTQ rights. However, the methods used, through cancel culture and online shaming, to achieve those laudable goals, are very violent and totalitarian, all taking place in the virtual realm of social media, but with very serious and long-lasting ‟real-life” consequences such as loss of employment, loss of reputation, self-harm and sometimes, suicide.

                    2. Can cancel culture enter through our European borders, in particular in France and the United Kingdom?

                    I hate to break it to you, but cancel culture is already upon us in France and the United Kingdom. We are in a globalised world, all of us are online and check the media and social media from all over the world, thanks to the internet. So this Northern American trend has, of course, reached our European shores.

                    It is worth noting that the recognition of ‟cancel culture”, and the realisation that is has become a sizable part of online culture, took place in the United Kingdom (‟UK”) at the beginning of the year 2020, when British television presenter and socialite Caroline Flack committed suicide allegedly because she was vilified on social media and by British tabloids, further to being sacked from British reality show ‟Love Island”. This UK epiphany about ‟cancel culture” arrived earlier than elsewhere in Europe, probably due to the shared language, and culture, that the British have with Americans and Canadians.

                    France is only now getting familiar with this new concept of ‟cancel culture”, further to hearing about the ‟letter on justice and open debate”, drafted, and signed, in July 2020, by more than 150 global intellectuals and authors (among whom Margaret Atwood, Wynton Marsalis, Noam Chomsky, J.K. Rowling and Salman Rushdie), and denouncing the excesses of online shaming and cancel culture. France is currently going through a phase of introspection, asking itself whether ‟la culture de l’annulation” could take off on its Gallic shores. And it is.

                    Proof is, I was interviewed for the 8.00pm TV News of France TV on Sunday 20 September 2020, to discuss the attempts made by no less than the new very controversial French minister of the interior, Gerald Darmanin – who was himself under criminal investigation for sexual coercion, harassment and misconduct in 2009, and then again between 2014 and 2017 – to eradicate from all SVoD services platforms such as YouTube, Spotify, Deezer, Dailymotion, the release of the first music album created by Franco-Senegalese 28 years’ old rapper, Freeze Corleone, ‟La Menace Fantôme” (‟LMF”). On which grounds is such cancellation requested? Provoking racial hatred and racial slander, no less.

                    Artist Freeze Corleone is an uncompromising rapper, abundantly peppering his raps with the French translations of ‟nigger” (‟négro”) and ‟bitches” (‟pétasses”) in the purest Northern American rap tradition (F. Corleone lived in Montreal, Canada, before settling down in Dakar, Senegal). He also obscurely refers to ‟Adolf”, ‟Goebbels”, ‟Ben Laden” and ‟Sion” in his rather enigmatic LMF lyrics. However, qualifying his body of work in LMF as racial slander and/or provoking racial hatred is a stretch. If you do not like it, because this content triggers you, just move on and don’t listen to it.

                    Freedom of speech is enshrined in the French declaration of rights of the human being and citizen, dated 1789. Article 11 of such declaration provides that the ‟free communication of thoughts and opinions is one of the most precious rights of the human being: any Citizen may therefore speak, write, print freely, except where he or she has to answer for the abuse of such freedom in specific cases provided by law”.

                    And such specific cases where freedom of speech may be curtailed, under French statutory law, include:

                    • Law dated 1881 on the freedom of the press which, while recognising freedom of speech in all publication formats, provides for four criminally-reprehensible exceptions, which are insults, defamation and slander, incentivising the perpetration of criminal offences, if it is followed by acts, as well as gross indecency;
                    • Law dated 1972 against opinions provoking racial hatred, which – like the four above-mentioned exceptions, is a criminal offense provided for in the French criminal code;
                    • Law dated 1990 against revisionist opinions, which is also a criminal offense in order to penalise those who contest the materiality and factuality of the atrocities committed by the Nazis on minorities, such as Jews, homosexuals and gypsies before and during world war two, and
                    • Law dated July 2019 against hateful content on internet, which provisions (requiring to remove all terrorist, pedopornographic, hateful and pornographic content from any website within 24 hours) were almost completely censored by the French constitutional council as a disproportionate infringement to freedom of speech, before entering into force in its expurgated finalised version later on in 2019.

                    Therefore, according to French sociologist Nathalie Heinich, France does not need ‟cancel culture” because freedom of speech is already strictly corseted by French statutory laws. By this, she means that French individuals won’t have to take to social media platforms, in order to ‟cancel” whoever is misbehaving, since the all-pervading French nanny state will strike the first blow to the ‟offender”, in the same manner than French minister of justice G. Darmanin unilaterally requested all cultural streaming and video platforms, from YouTube to Spotify and Deezer, as well as all French radio and TV channels, to immediately and permanently remove the songs of Freeze Corleone’s LMF, further to opening a criminal inquiry against the latter, for allegedly committing racial slander and/or provoking racial hatred through his lyrics.

                    Is this above-mentioned French regal method a better tool than having the populace publicly decrying and shaming an individual who ‟steps out of line”, by using ‟cancel culture”? By no means, because, at the end of the day, it’s our collective freedom of speech which is being breached and infringed, on a whim. And that is unacceptable, in a democracy.

                    On the other side of the channel, the legal framework around freedom of speech is no panacea either. Freedom of expression is usually ruled through common law, in the UK. However, in 1998, the UK transposed the provisions of the European Convention on human rights – which article 10 provides for the guarantee of freedom of expression – into domestic law, by way of its Human rights act 1998.

                    Not only is freedom of expression tightly delineated, in article 12 (Freedom of expression) of the Human rights act 1998, but there is a broad sweep of exceptions to it, under UK common and statutory law. In particular, the following common law and statutory offences, narrowly limit freedom of speech in the UK:

                    • threatening, abusive or insulting words or behaviour intending or likely to cause harassment, alarm or distress, or cause a breach of the peace (which has been used to prohibit racist speech targeted at individuals);
                    • sending any letter or article which is indecent or grossly offensive with an intent to cause distress or anxiety (which has been used to prohibit speech of a racist or anti-religious nature, as well as some posts on social networks), governed by the Malicious communications act 1988 and the Communications act 2003;
                    • incitement (i.e. the encouragement to another person to commit a crime);
                    • incitement to racial hatred;
                    • incitement to religious hatred;
                    • incitement to terrorism, including encouragement of terrorism and dissemination of terrorist publications;
                    • glorifying terrorism;
                    • collection or possession of a document or record containing information likely to be of use to a terrorist;
                    • treason including advocating for the abolition of the monarchy or compassing or imagining the death of the monarch;
                    • obscenity;
                    • indecency including corruption of public morals and outraging public decency;
                    • defamation and loss of reputation, which legal framework is set out in the Defamation act 2013;
                    • restrictions on court reporting including names of victims and evidence and prejudicing or interfering with court proceedings;
                    • prohibition of post-trial interviews with jurors, and
                    • harassment.

                    In Europe, and in particular in France and the UK, there is already a tight leash on freedom of speech, whether at common law or statutory law. However, ‟cancel culture” is nonetheless permeating our European online shores, following the trend started in Northern America. As a result, it is a tough time to be a free and creative European citizen, let alone a public figure or corporation, in this 21st century Europe. Indeed, not only could you have trouble with the law, if you were to make triggering or contentious comments or jokes or lyrics in the public domain, but you could also be shot down in flames by the online community, on social media, for your speech and expression.

                    3. How to ride the storm of ‟cancel culture”, while remaining consistently creative and productive?

                    In the above-mentioned cultural and legal context, it is crucial for creative professionals to think long and hard before posting, broadcasting, speaking, and even behaving.

                    As a result, book publishers use the services of ‟sensitivity readers”, before releasing a new work, whereby such consultants read books to be published, in order to look for, and find out, any clichés, stereotypes, scenes, formulations that may offend a part of the readership. This use of sensitivity readers is becoming more and more systematic, especially when the author speaks about themes which he, or she, does not personally master.

                    For example, an heterosexual author who describes a gay character, or a white author who describes Mexicans, in his or her new book, will most definitely have a sensitivity consultant review his or her output before publication. Almost inevitably, such sensitivity reader will request that some changes be made to the written content, so as to avoid a boycott of the published book, or cancellation of the author and book, altogether.

                    Whilst some of the classics of global literature were perceived as very shocking when they were first released (think ‟Lolita” from Vladimir Nabokov about the obsession of a middle-aged literature professor with a 12 year’s old girl, which today would probably be described as a glorification of pedophilia), they would probably never see the light of day, if they were to be published in our era.

                    Therefore, today’s cultural sensitivities push towards the publication and broadcasting, of written, audio and visual creative content which is bland, right-thinking, watered-down, in which the author only refers to what he or she knows, in the most neutral way possible.

                    This need to use ‟auto-censorship” in any content a creator wishes to publish is compounded by the fact that today, consumers of creative content do not differentiate between the author of the work, and his or her creative output. There is no separation between the author and content creator, and his or her body of work and/or fictional characters. With Millenials and US universities becoming obsessed with identity questions (i.e. the identity or feeling of belonging to a group, such as the gay community, the black community, etc.), it is the person who writes the book, or song, or writes or directs a film, who is now also important, maybe even more important than the work itself.

                    As a result, any content creator who writes or sings or produces an audiovisual work about a community other than his or her own, may be accused of cultural appropriation (i.e. the adoption of an element or elements of one culture or identity by members of another culture or identity) and even become the object of victimhood culture (i.e. a term coined by sociologists Bradley Campbell and Jason Manning, in their 2018 book ‟The rise of victimhood culture: microaggressions, safe spaces and the new culture wars”, to describe the attitude whereby the victims publicize microaggressions to call attention to what they see as the deviant behaviour of the offenders, thereby calling attention to their own victimization, lowering the offender’s moral status and raising their own moral status).

                    In this climate, it is therefore easier to publish or broadcast creative content if you belong to a minority (by being, for example, homosexual, black, brown, or a female), while white heterosexual male creators have definitely become disadvantaged, and more susceptible to being targets of ‟cancel culture”.

                    To conclude, a lot of prior thoughts and research and preparation and planning need to be put into the creation, and then broadcasting and publication, of any creative content today, not only with respect to such output, but also in relation to the identity, and positioning, of his or her author. If this conscious effort of adhering to right-thinking and bland ideologies is appropriately and astutely done, you and your creative output may successfully ride the storm of, not only French and UK legal limitations to your freedom of expression, but also the nasty impact of cancel culture and online shaming, hence maximising your chances that your creative work generates a commercial success.



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