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Musical copyright and contract

19 October 09

The House of Lords decision in the Procol Harum case may leave some in the music business a whiter shade of pale

by Martin English

In the long running copyright dispute over the organ solo in Procol Harum's "Whiter Shade of Pale", the Law Lords voted unanimously in favour of Matthew Fisher, Procol Harum's organist (Fisher v Brooker [2009] UKHL 41). The ruling means that Mr Fisher will share in future royalties.

The background facts

The original music was composed in March 1967 by Gary Brooker, Procol Harum's lead singer and pianist, to lyrics written by Keith Reid, the band's manager. Mr Brooker and Mr Reid soon after entered into a written agreement with Essex Music Ltd whereby they assigned the copyright in the words and music. As part of this agreement, Essex agreed to pay Mr Brooker and Mr Reid royalties in the song, which they agreed to share equally between them. It was after this event that Mr Fisher joined the band, adding to the music in the song by composing the now familiar organ introduction and melody. It was this new version (the "work"), released on 12 May 1967, which became an instant hit.

On 16 May 1967 the band signed a recording contract with Essex, which would enable Essex to exploit any recording made by the band for a period of a year. In return Essex would pay the band specified royalties. The band went on to record a number of other songs, whose musical and lyrical copyrights were assigned to Essex in the same form and on the same terms as the assignment. Mr Fisher left the band in 1969, but appeared with them to perform from time to time between 1969 and 2003.

In 1967 Mr Fisher raised the question about having a share in the rights in the work, but this was rejected by Mr Brooker and Mr Reid. In 1971 and in 1991 he suggested that he was entitled to certain royalties which he was not receiving, but it seems that he never "made suggestions on these occasions that he was entitled to any money in respect to the exploitation of the work": [2009] UKHL 41, per Lord Neuberger.

In or about 1993, Essex's rights under the assignment and recording contract were assigned to Onward Music Ltd. As a consequence, Onward became the owner of the copyright in the work. In the meantime, the first recording (which Mr Fisher had contributed to and which had evolved into the work) was doing very well, with substantial royalties being collected and paid out to Mr Brooker and Mr Reid.

Mr Fisher began his original claim in 2005 in which he sought his share of the musical copyright in the work. He was successful in the High Court where the judge, Blackburne J, found mostly in his favour: [2006] EWHC 3239 (Ch). However on appeal, Mr Brooker and others (the "respondents") substantially succeeded, Mummery LJ and Sir Paul Kennedy setting aside two out of three declarations made in the High Court: [2008] Bus LR 1123. Mr Fisher appealed to the House of Lords.

Issues before the courts

The House of Lords identified seven distinct issues that had been before the High Court ("the judge") and the Court of Appeal.

Was a fair trial possible?

Despite the considerable passage of time between the original composition in 1967 and Mr Fisher's claim in 2005, the judge ruled that a fair trial was possible. Although this was challenged by the respondents, the Court of Appeal upheld the judge on this. The House of Lords seemed to agree (there was no appeal on this point from the respondents).

If and to what extent could Mr Fisher claim any share of musical copyright?

The judge found that the organ solo was sufficiently different from what Mr Brooker had composed on the piano. In law therefore there was enough to make Mr Fisher joint author. On that basis he was accorded a 40% share in the musical copyright. The Court of Appeal rejected the respondents' appeal on this issue, and the respondents did not seek to appeal the issue further.

Did Mr Fisher impliedly assign his copyright to Essex?

Although he had a claim in law to copyright by being joint author, it was argued by the respondents that Mr Fisher had impliedly assigned any musical copyright he acquired in the work to Essex. This was based on copyright in the song in its original form being assigned to Essex in March 1967. This argument was rejected in the High Court. The Court of Appeal left the point open. The House of Lords felt that this was an issue on which it should give its opinion.

Did the existence of the recording contract mean that Mr Fisher lost his right to maintain a claim in the musical copyright?

The judge said no. The majority in the Court of Appeal left it open. The respondents in the House of Lords maintained their case and appealed on this point.

Did Mr Fisher lose his interest in the copyright as a result of estoppel, laches or acquiescence?

No, the judge found for Mr Fisher on this issue. The Court of Appeal said the judge was entitled to come to this conclusion. The respondents appealed on this point.

Could Mr Fisher claim for royalties paid out for the work in the six years before the issue of proceedings?

Any claim going back beyond six years would be time barred. The money gathered by the collecting societies had been paid out to Essex, and from or around 1993, to Onward, as copyright owners. From this, and pursuant to the assignment, Mr Brooker and Mr Reid received payment which they split equally between them.

The judge in the High Court rejected Mr Fisher's claim, stating that, in allowing the collection societies to account to the respondents and choosing not to make a claim, he had in effect gratuitously licensed the exploitation of his copyright. However, the judge then went on to say that this implied licence was revoked at the point Mr Fisher's solicitor intimated his claim to Mr Brooker and Mr Reid, in May 2005. Mr Fisher did not appeal this decision to the Court of Appeal.

What was the nature of the relief to be awarded to Mr Fisher?

The judge refused an injunction restraining Essex from exploiting the musical copyright in the work, as Mr Fisher had failed to establish his interest. Mr Fisher did not appeal on this point.

The judge went on to make three declarations:

  1. Mr Fisher was co-author of the work as released in May 1967.
  2. Mr Fisher had a 40% share in the musical copyright in the work.
  3. The respondents' licence to exploit the work was revoked in May 2005.

The Court of Appeal allowed the respondents' appeal, and set aside the second and third declarations. They said that the implied licence was not revoked and that the passage of time, 38 years in this case, acted as a bar to Mr Fisher bringing his claim.

The House of Lords therefore concluded that there were three matters in particular for them to consider:

  1. the implied assignment issue;
  2. the recording contract issue; and
  3. the laches, estoppel and acqiescence issue.

Implied assignment

The respondents' line was that, as Essex had taken an absolute assignment of the musical and lyrical copyright in the song before it was reworked into the format that was to become the work, Essex clearly intended to exploit that song. On that basis, Essex intended that they would be the only owner of the copyright in the work to the exclusion of all others, including Mr Fisher.

In order to succeed, this argument would have to be based on the law of implication and the accepted rules in relation to implied contract terms, specifically those that relate to implied terms in fact. The accepted tests in this regard are the "officious bystander" test and "business efficacy" test. In the present case therefore, in order to succeed, the respondents would have to demonstrate that, at the time of the assignment, it would have been obvious to Mr Fisher, and Essex, that his interest in the musical copyright had been, or would be at some point in the future, assigned to Essex, and that the business relationship between the parties could not have operated on a practical basis without that assignment. Lord Neuberger, in the leading judgment, found problems with this line of argument on a number of points.

First, it assumed that Mr Fisher knew that the song had been recorded, in its original form, and that the copyright had been assigned to Essex soon after.

The original recording was made in March 1967. The reworked version which became the work that was released on 12 May 1967, and to which Mr Fisher had contributed, was recorded in April 1967. It was therefore conceivable that Mr Fisher might have known of the assignment made to Essex in March 1967. However as Mr Fisher did not say that he was aware of the assignment, nor was it put to him that he did, the respondents could therefore not argue that it was obvious to Mr Fisher, and Essex, that his interest in the musical copyright had been assigned, or would have been at some point in the future, to Essex. Lord Neuberger also decided that as Mr Fisher had not assigned copyright in other musical works as at April 1967, this was sufficient to conclude that he was not aware of Essex's usual business practices.

Secondly, the existence of the recording contract, which was signed on 16 May 1967 with Essex, four days after the release of the work, was further evidence to highlight, according to Lord Neuberger, that there was no implied assignment.

The point here was that these were five young musicians who were looking to Essex to contract with them in an appropriate manner. Indeed Baroness Hale's opinion focuses principally on the age of the musicians at the time, and the special protection in law afforded to contracting "infants" – at the time those under 21. In essence the law allowed infants to make a binding contract of services, provided that they were not disadvantaged by it. Baroness Hale identifies that the recording contract opened with the words "This contract for your personal services". Thus it seems that Essex were aware of the law in relation to "infants", as it was at the time, and sought to deal with the assignment as a separate contracting matter. Taking points one and two together, there was therefore no implied assignment.

Furthermore, Lord Neuberger suggested (at para 54) that, even if an implied assignment did exist, "an outright free assignment", would have been more than was necessary for the purposes of business. He suggested that a licence would have been more than sufficient in this regard for Essex to exploit the first recording. In light of the other problems with the implied assignment argument, this point was not explored any further.

Recording contract

Turning to the recording contract, entered into on 16 May 1967 after the work was released on 12 May, its purpose was to enable Essex to exploit the first recording (of April 1967) free from "any rights which band members had in the sound recording itself" (per Lord Neuberger).

There were two clauses in particular that counsel for the respondents relied on to argue that the band members had assigned to Essex any copyright interest in the work that was owned by any member of the band. These were:

  • Clause 3(i)(a) – here the band members granted to Essex "the right to manufacture… sell, lease, license or otherwise use or dispose of… records embodying the performances to be recorded hereunder;" and
  • Clause 3(i)(e) – here the band members also granted to Essex "the right to incorporate in records to be made hereunder instrumentations, orchestrations and arrangements owned by the manager at the time of recording them".

This argument was rejected at first instance, as the recording contract only gave Essex the right to exploit the first recording, not ownership of the copyright in the work. The judge concluded that Mr Fisher did not assign his share of the musical copyright in the work to Essex in terms of the recording contract, and the House of Lords agreed with this. The reason for this, according to Lord Neuberger (at para 57), was that clause 3(i)(a) and (e) gave what in effect was a licence to Essex from Mr Fisher, to exploit the first recording, not an outright free assignment, the point made above.

In further analysis of why Lord Neuberger concluded that clause 3(i)(a) and (e) of the recording contract were to be construed as a licence, he suggests that not to do so would mean that a band member with an interest in the copyright in the work would have been able to prevent Essex from enjoying its apparently unencumbered rights under clause 3(i)(a). This in turn, would go against the reason for having the recording contract in the first place, which was to allow Essex to exploit any recording made by the band for a one year period.

Here it seems the Law Lords were striving to find ways in which to recognise the artistic endeavour of Mr Fisher, whilst balancing Essex's commercial interests, at the same time acknowledging and protecting the ethos of the intellectual property regime, which as Lord Hope of Craighead says in his opinion is to "provide an incentive to innovation and creativity". In addition Lord Hope goes on to recognise (at para 8) that it was Mr Fisher's contribution that made the song such a success, and that he was entitled to "protect the advantage that he has gained from this and to earn his reward [from the work]".

Laches, estoppel and acquiescence

The respondents put forward a number of equity based arguments based on the doctrines of laches, estoppel and acquiescence, and claimed that these arose on three occasions: 1967, around the time of the first recording; 1969, when Mr Fisher left the band; and 2005, at the commencement of the present action.
Acquiescence was dismissed as a line of argument in the present case as it was construed as either a form of estoppel or laches (per Lord Neuberger at para 62). The main lines of argument were therefore based on the doctrines of estoppel and laches.

Estoppel

The respondents' allegation in relation to the period in 1967 was that at the time, Mr Fisher was silent in relation to his claim of copyright in the work. On that basis Mr Brooker and Mr Reid assumed that he had no claim, or was not making a claim. Likewise, Essex spent money and put resources into promoting the work, assuming that the assignment sufficiently set out the terms of the copyright ownership and commercial terms of the royalty payments. The respondents argued in the present case that, had Mr Fisher made his claim in April or May of that year, then he would have had to have assigned his share in the copyright to Essex. Furthermore, they suggested that as the work had become such a success, Mr Fisher, in staying silent, was now in a far greater bargaining position. The court found a number of problems with this argument.

First, the respondents did not plead that if Mr Fisher had made his claim in 1967, he would have assigned his share in the copyright to Essex. What the respondents pleaded was that the song would have been recorded without Mr Fisher and/or he would have been kicked out of the band.

Secondly, following on from this (and as a consequence), there was therefore no discussion about any assignment and what impact this might or might not have had. Nor was there any discussion on how Mr Brooker and Mr Reid might have acted differently over the intervening years had there been an assignment. The court dismissed this as being inappropriate to be raised on the first time at appeal, and also impossible to succeed on appeal because the judge would not have had the chance to investigate the facts properly, nor would the claimant have had a similar chance to investigate the facts (at para 67).

Thirdly, had Mr Fisher assigned his copyright to Essex, he would more than likely have received a very significant amount of money given the success of the work. The respondents' estoppel argument was based on them showing that they reasonably relied on Mr Fisher making no such claim, that they acted on that reliance, and that it would be unfairly to their detriment if he was to raise or to enforce such a claim (para 63). However the judge in the High Court said it would be "unjust" ([2006] EWHC 3239 (Ch), at para 81) to deprive Mr Fisher of future income from his copyright in the work based on the estoppels pleaded. This was on the basis that the respondents had enjoyed a significant income for nearly 40 years without Mr Fisher receiving his share. The Law Lords could not disagree with this line of reasoning.

Turning to estoppel based on the events in 1969, the respondents followed a similar line of argument to the one that they had put forward for 1967. They said that as Mr Fisher had not raised his claim at the time of leaving the band, this deprived him of the right to raise it in the future. This was rejected by the House of Lords. For one, Essex and Onward were not involved in the negotiations in 1969. Also, at the time there was no mention made of the existence of the copyright which Mr Fisher might have had in the work. Nor was there any suggestion in the agreement reached at the time that it was intended to be a full and final settlement of all Mr Fisher's rights. Estoppel based arguments relating to 1969 might have had some gravitas at first instance. Lord Neuberger dismissed them as not being capable of taking matters further in light of the facts found by the judge.

Moving to the Court of Appeal reasoning, the House of Lords identified that the court agreed with the judge in that they also rejected the respondents' case based on estoppel. The Court of Appeal however said that Mr Fisher was not entitled to determine the licence which he had impliedly granted. The reason for this according to the court was twofold.

First, the work had been exploited by Essex, Onward and Mr Brooker, which was known to Mr Fisher. It would therefore have been unfair for him to enforce his right in the copyright by terminating the implied licence, which the respondents had acted on for a great number of years. Secondly, they also went on to say that the delay in bringing his claim would put Mr Fisher in a better bargaining position than in 1967 and 1969.

The House of Lords did not like this reasoning. On the first point they thought that it would be inconsistent not to allow a claimant on equitable grounds to declare that his right existed in a copyright, where he had not been estopped from doing so. They said (at para 63) that if the Court of Appeal accepted that Mr Fisher had 40% of the musical copyright in the work, he could not be prevented from bringing proceedings for injunctive relief for copyright infringement, which in effect their decision was doing. Lord Neuberger stated that "the refusal to grant him declaratory relief because he [Mr Fisher] might seek an injunction on the back of it therefore seems to be questionable as a matter of principle" (at para 73).

It seems the reason that the Court of Appeal took this line was that they felt it would be iniquitous of Mr Fisher to seek an injunction to enforce his rights in the work. The House of Lords disagreed, stating that should Mr Fisher apply for injunctive relief (as he had sought in the High Court) to prevent unauthorised use of the work, then this would be looked at on the merits. If, by granting injunctive relief, the action would be overly harsh, then the court would refuse such an action and leave Mr Fisher with a remedy in damages (at para 74).

The final point the House of Lords made in relation to this was that the Court of Appeal's decision that Mr Fisher could not determine the implied licence would prevent him from claiming any royalties in the work. This they felt was wrong, on the basis that Mr Fisher had not been estopped from declaring his 40% interest in the copyright in the work (at para 76).

Finally, in relation to bargaining position, the House of Lords dismissed this as it had not been pleaded or argued before the judge. That aside, even if it had, the House of Lords all agreed that in the time taken to bring the claim, the respondents had enjoyed a very considerable financial benefit, which would outweigh any disadvantage arising from the delay in bringing the claim.

Laches

The passage of time did not prevent Mr Fisher's claim. The House of Lords did however consider the limitation period in its judgment.

In relation to copyright, there is no statutory limitation period in English law. On that basis the respondents relied on the equitable doctrine of laches. The Lords dismissed this argument too.

First, as laches only operated as a bar on equitable relief, it could therefore not be used as a declaration as to the existence (or not) of a long term property right which was recognised by statute. This would not be equitable relief (at para 79).

Secondly, the respondents would have to demonstrate that they had suffered as a result of the delay. As already discussed, they could not. They had after all gained a vey significant financial advantage over Mr Fisher in the intervening 38 years.

Having considered all the respondents' arguments based on equitable principles, the House of Lords went on to reject them all for the reasons just set out. They then restored the two declarations set aside by the Court of Appeal in favour of Mr Fisher.

As an interesting aside, Lord Hope, obiter, discussed the position under Scots law. He said that it might be somewhat less certain due to the Prescription and Limitation (Scotland) Act 1973, in particular the operation of s 8 and the application of the 20 year negative prescription period.

Section 8 states that where a property right that subsists for a 20 year continuous period has been unexercised or unenforced, then on expiration of the 20 year period, the right is extinguished. The section relates to heritable or moveable property. It is unclear if this would include copyright. Lord Hope however commented that s 8 should not be used to extend to incorporeal property, in this case copyright, where the duration of the right has been set out in statute. In this regard, s 12 of the Copyright, Designs and Patents Act 1988 sets out the duration of copyright in the UK, which Lord Hope commented was not subject to any provision in the 1973 Act applying only to Scotland.

Further discussion

It could be said that the big point brought out in the case was that the passage of 38 years would not be a bar to Mr Fisher bringing his claim. Mr Fisher was therefore able to make his claim, but only for future royalties. He had in effect given an implied licence to the respondents to exploit the work, which was revoked in 2005 at the time he brought his first claim.

This line of reasoning was based on the central tenet of property law which recognises rights in things. As Lord Hope pointed out, the distinction which exists between the exercise of rights and the obtaining of discretionary remedies is of fundamental significance in any legal system (at para 8). In this regard, there is no stronger right than a real right of ownership in property, which applies to intellectual property. It is for the owner to exercise his right as he sees fit in line with the law. It is not for a court to decide, other than to assist exploitation of the owner's property rights.

It seems that the judge's second and third declarations were designed to allow Mr Fisher to exploit his rights according to intellectual property law, and did not grant discretionary remedies. Due to the length of time which had passed before Mr Fisher brought his claim, the Court of Appeal was reluctant to allow it, saying that by Mr Fisher's apparent acquiescence, he had not in fact revoked his implied licence. However it seems that in denying Mr Fisher these further declarations, the Court of Appeal was in effect going against the distinction outlined above. Mr Fisher as co-author of the work had real rights in property, which moving forward he would be able to enjoy, reaping the rewards of his intellectual endeavours.

It seems that there is no doubt that the Law Lords were seeking to uphold the integrity of the intellectual property regime in the UK. It is a system designed to encourage and award innovation and artistic endeavour. In recognising that Mr Fisher contributed the music that was central to the success of the song, the Law Lords were sending out a clear signal that such endeavours will be recognised and protected in law. This is to be commended and is just.

The Law Lords also recognised that one party had gained very significantly financially, while the other had not. They wanted to rectify this moving forward, and see that Mr Fisher now started to benefit from his contribution. This was equitable.

Furthermore, it is apparent that the law will consider very carefully the intentions of contracting parties and what they intend. It is unlikely that recording artists would intend to assign away any future rights they may have in their work for no financial gain. Nor would it be likely that someone coming into a band would have impliedly agreed to past actions of which he or she was not aware. To do so otherwise on both counts would not make commercial sense.

There are also lessons to be learned from this case for record companies. They would be well advised to ensure that their recording contracts are watertight in relation to past, current and future ownership of intellectual property rights, more so now than ever. They should set out clearly and fully everything that they have agreed with the artist in each case, to avoid future disputes being settled on the basis of common law arguments.

Lawyers drafting recording contracts for record companies should also be alive to the possibility that a new band member could make a significant contribution to pre-existing works of the band, and include drafting to cover that.

As a result of this case, many artists may well be considering whether they have similar claims to Mr Fisher. Record companies beware. They might just find themselves going a whiter shade of pale at the prospect.

Martin English is a trainee solicitor with Brodies LLP. He has an LLM in commercial law from the University of Glasgow. Before coming into the law he worked for nine years in the IT sector.
 

 

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