Audio-Visual Copyright Society Ltd v New South Wales Department Of School Education
[1997] ACopyT 1
•1 May 1997
CATCHWORDS
COPYRIGHT - Copyright Tribunal - determination of equitable remuneration for the making of copies of television broadcasts used by schools for educational purposes - applicant a collecting society declared under Parts VA and VB of Copyright Act 1968 - respondents all bodies having responsibility for the administration of schools in Australia, whether public or private - consideration of applicable legislation - relevant principles - analysis of evidence.
Copyright Act 1968, ss 28, 31, 85, 86, 87, Part VA, Part VB, s.153A
Copyright Tribunal (Procedure) Regulations, Regulation 25A
AUDIO-VISUAL COPYRIGHT SOCIETY LIMITED V NEW SOUTH WALES DEPARTMENT OF SCHOOL EDUCATION AND OTHERS
NOS CT 45 TO CT 73 OF 1994
CORAM: SHEPPARD P
PLACE: SYDNEY
DATE: 1 MAY 1997
COMMONWEALTH OF AUSTRALIA
COPYRIGHT ACT 1968
IN THE COPYRIGHT TRIBUNAL
NOs. CT 45 to CT 73 of 1994
Reference by:
Audio-Visual Copyright Society Limited
Respondents:
New South Wales Department of
School Education and Others
TRIBUNAL: Sheppard P
PLACE: Sydney
DATE: 1 MAY 1997
REASONS FOR DECISION
SHEPPARD P: These 29 applications under ss.135J and 135ZW of the Copyright Act 1968 (“the Act”) are brought by Audio-Visual Copyright Society Limited (“AVCS”) against a number of educational authorities having responsibility for the administration of schools (not universities) in Australia whether at the primary or secondary level. The intention of AVCS is to catch directly or indirectly all schools, whether public or private, within Australia. The purpose of the applications is to have the Tribunal determine the amount of equitable remuneration payable to AVCS on behalf of the owners of the copyright in the works or subject matter comprised in television programs which have been copied by schools for their educational purposes. Only television broadcasts are in question; radio broadcasts are not.
Each of the applications is in similar form. It is sufficient to refer as necessary to that filed in matter No. CT 45 of 1994 in which the respondent is the New South Wales Department of School Education.
On 13 June 1990, the Federal Attorney-General declared AVCS to be the collecting society for the purposes both of Parts VA and VB of the Act. The declaration for the purposes of Part VA of the Act was made pursuant to s.135P thereof and that for the purposes of Part VB of the Act under s.135ZZB. The declaration made under s.135ZZB related only to the copyright in a sound recording or a cinematograph film or a work included in a sound recording or cinematograph film.
It is convenient to refer at this early stage of these reasons to the relevant sections of Parts VA and VB of the Act and to some of its other provisions. Part VA is headed, “Copying of Broadcasts by Educational and other Institutions” and Part VB, “Copying of Works Etc by Educational and other Institutions”.
The central provisions of Part VA are to be found in Division 2 of the Part which is entitled “Copying of broadcasts”. Section 135E confers a compulsory licence on bodies administering schools to make copies of broadcasts, both radio and television, in the circumstances provided for in the section. The compulsory licence will not arise unless there is in force a remuneration notice given by or on behalf of the administering body to the collecting society; the copy of the broadcast is made solely for the educational purposes of the institution or of another educational institution; and the administering body complies with subsec. 135K(1) or (3) in relation to the copy. For present purposes AVCS is the collecting society referred to in the section. “Administering body” is defined in s.135A to mean a body administering an institution and “institution” is defined to mean an educational institution or an institution assisting intellectually handicapped persons. This case is not concerned with copying of broadcasts by institutions assisting intellectually handicapped persons.
Remuneration notices are provided for in subsec. 135G(1) which says that an administering body may, by notice in writing given to the collecting society by it or on its behalf, undertake to pay equitable remuneration to the society for copies of broadcasts made by it, or on its behalf, being copies made while the notice is in force. Subsec. 135G(2) provides that a remuneration notice shall specify whether the amount of equitable remuneration is to be assessed on the basis of a records system or a sampling system. Sections 135H and 135J deal respectively with records notices and sampling notices. This case is not concerned with records notices so that the relevant section is s.135J. By s.135A a sampling notice is a remuneration notice specifying that the amount of equitable remuneration payable to the collecting society by the administering body giving the notice is to be assessed on the basis of a sampling system. The expression “sampling system” is not defined.
Subsection 135J(1) of the Act is as follows:
“Where a sampling notice is given by, or on behalf of, an administering body, the amount of equitable remuneration payable to the collecting society by the administering body for copies of broadcasts made by it, or on its behalf, while the notice is in force is such annual amount per student of the institution concerned as is determined by agreement between the administering body and the collecting society or, failing such agreement, by the Copyright Tribunal on application made by either of them.”
Subsec. 135J(2) provides that the annual amount referred to in subsec. (1) is to be determined (whether by agreement or by the Copyright Tribunal) having regard to the extent to which copies of broadcasts are made by, or on behalf of, the administering body in a particular period and to such other matters (if any) as are relevant in the circumstances. Subsection 135J(3) provides that the extent of copying of broadcasts and any other matters that are necessary or convenient to be assessed by use of a sampling system are to be assessed by use of a sampling system determined by agreement between the administering body and the collecting society or failing agreement, by the Tribunal on application made by either of them. There is no application before the Tribunal to determine a sampling system. This is no doubt because the parties are content with the system which is presently in place. I shall refer to evidence about this in due course.
It may be observed at this point that the provisions of s.135J contemplate the remuneration payable being calculated in the form of an annual amount per student of the institution concerned. It follows that whatever the method adopted for estimating equitable remuneration may be, the ultimate determination must be in the form of an annual amount per student of the institution. AVCS regards the fixing of a formula per student as involving difficulties of calculation and estimation. It would prefer to have a system which enabled the calculation to be done according to the amount of screen time occupied by so much of each program as is copied. AVCS contends that a rate per student may not reflect equitable remuneration.
It is important in this connection to note that all parties wish the Tribunal to fix a per student rate which will apply across the board irrespective of: sizes of schools, whether the schools are primary or secondary, the degree of use by schools of copies of television broadcasts and any other matters which may suggest to an observer that differential rates per student should be payable by some schools or groups of schools. One such matter would arise from the fact that some programs may be perceived to be more valuable than others because of differences in their quality, their relevance to particular education programs, their cost to produce or for other reasons.
This approach is similar to that of the parties in Copyright Agency Limited v Department of Education of New South Wales (1985) 59 ALR 172. There I referred (at 176) to submissions made by counsel for the applicant that, to avoid a multiplicity of proceedings, it was requested by all parties that the Tribunal determine the same equitable remuneration for each of the applications. The submission acknowledged that this would probably involve the Tribunal applying some averaging process and that it might produce a somewhat artificial result. Nevertheless, it was said that it was more likely to facilitate the proper functioning of s.53B of the Act which was then in force. In relation to the submission I said (at 176) that from a practical point of view, it was clearly desirable that the parties’ wish that there be an across the board figure arrived at be met. I said that that was what I proposed to attempt to do but acknowledged that there might be some unfairness, as amongst the various owners of copyright, in dealing with the applications in this way. I propose to adopt the same course in the present cases. I am satisfied that any other approach will yield an impractical outcome which will not be of benefit to the parties.
Relevant to the provisions of s.135J are the provisions of s.153A of the Act which is to be found in Part VI thereof. It contains a number of provisions relating to the Copyright Tribunal. The section appears in Division 3 of the Part which is headed, “Inquiries by, and Applications and References to, the Tribunal”.
Section 153A provides that the parties to an application to the Tribunal under s.135H or subsec. 135J(1) are to be the collecting society and the administering body of the school in question. Subsection 153A(2) provides that, where an application is made to the Tribunal under either s.135H or s.135J, the Tribunal shall consider the application and is to make an order determining the amount per copy or per student of the relevant institution as the case may be that it considers to be equitable remuneration for the making of copies of television broadcasts.
Subsection 153A(3) is as follows:
“(3) In making an order [under subsec. 135J(1)], the Tribunal:
(a)shall have regard to the extent to which copies of television broadcasts are made by, or on behalf of, the administering body solely for the purpose of enabling the material included in the broadcasts to be seen and heard, at times more convenient than the times when the broadcasts were made; and
(b)may have regard to such other matters (if any) as are prescribed.”
Regulation 25A of the Copyright Tribunal (Procedure) Regulations deals with matters prescribed for the purposes of para. 153A(3)(b) of the Act. Regulation 25A is as follows:
“(1) For the purposes of paragraph 153A(3)(b) of the Act the following matters are prescribed:
(a)the nature of the works, sound recordings or cinematograph films included in the broadcasts;
(b)the institutions for which the copies of the broadcasts are made;
(c)any matters that have been assessed by use of a sampling system determined under subsection 135J(3) of the Act;
(d)the need to ensure adequate incentive for the production of educational works, educational sound recordings and educational cinematograph films in Australia;
(e)the purpose and character of the copying;
(f)the effect of the copying on the market for, or value of, the material included in the broadcasts;
(g)the special circumstances of external students including any difficulties faced by those students in meeting the requirements of section 103C of the Act;
(h)any unremunerated contribution by institutions to the creation of the material included in the broadcasts.
(2) In subregulation (1), ‘the external student’, in relation to an institution, means a person undertaking a correspondence course or external study course provided by the institution.”
With s.135J needs to be read subsec. 135K(3) of the Act which provides that, where a sampling notice is given by, or on behalf of, an administering body, the body shall mark, or cause to be marked, in accordance with the regulations, each copy of a broadcast made by it, or on its behalf, whilst the notice is in force, or any container in which such a copy is kept. Similar, but rather more elaborate provisions, are made in subsec. 135K(1) which applies in cases where records notices are given.
There are some further sections of Division 2 of Part VA to be noticed although I do not refer to them in detail. These are s.135L dealing with inspection of records, s.135M dealing with revocation of remuneration notices and s.135N dealing with requests for payment of equitable remuneration.
Division 3 of Part VA deals with collecting societies. Subsection 135P(2) provides that the Attorney-General is not to name more than one body in a declaration made pursuant to subsec. 135P(1) and shall not make a declaration while an earlier declaration is in force. The provisions of subsec. 135P(3) specify a number of conditions which must be complied with before the Attorney-General will declare a body to be a collecting society. One of these conditions, which is provided for in para. (3)(b), is that all relevant copyright owners or their agents must be entitled to become members of the society. In this respect it is to be observed that the collecting society here differs from other collecting societies, notably the Australasian Performing Right Association, in that the collecting society has members and, importantly, that the members do not assign their copyright or some of their exclusive rights in the copyright comprised in their works or subject matter to the collecting society; cf ss.31, 85, 86 and 87. The copyright owners retain ownership of copyright in their works or subject matter.
It will have been observed that the provisions of s.135E confer a license in respect of works, sound recordings and cinematograph films included in a broadcast. So both works of all kinds and some subject matter, sound recordings and cinematograph films included in broadcasts, are covered by the licence. It is also to be observed that it is copies of broadcasts which are covered by the licence not the broadcasts themselves. It would have been unnecessary to make any provision in respect of broadcasts of works or subject matter in the course of educational instruction. The relevant provisions are to be found in s.28, those of subsec. 28(4) making it clear that broadcasts of works for educational purposes like public performances of works for such purposes are not an infringement of the public performance right conferred by para. 31(1)(iii) of the Act.
The relevant provisions of Part VB of the Act correspond with those of Part VA. I do not refer to the detail of these. But I note that the compulsory licence conferred on educational institutions is provided for in Division 2 of the Part which deals with copying of works by educational institutions. Division 5 deals with equitable remuneration. Remuneration notices are provided for in s.135ZU, records notices in s.135ZV and sampling notices in s.135ZW. Section 135ZX, like s.135K in Part VA, deals with marking and record keeping requirements. Division 6 of Part VB deals with collecting societies and contains s.135ZZB pursuant to which AVCS was declared to be the collecting society for the purposes of the Part. The declaration was subject to the limitations earlier referred to.
That completes the account of the relevant provisions of the legislation. I return to the AVCS application. After referring to certain agreements which had been made between the Department of Education and AVCS, the application said in para. 9 that an agreement had not been concluded with AVCS as to the annual amount per student of the educational institutions which would amount to equitable remuneration payable to the applicant for copies of broadcasts made by it or on its behalf after 1 July 1994. The application then gave some particulars of surveys conducted by AVCS and made certain allegations concerning the annual level of copying of television broadcasts during the years 1992 and 1993. It was alleged that the greatest single category of television broadcasts copied during this period was daytime educational programs.
Pursuant to directions which were given by the Tribunal, AVCS filed points in support of its case. The respondents to the various applications filed points in reply. I do not go to the detail of the points in support of the AVCS case or the points in reply. It is more helpful if I set out in broad terms the matters upon which the parties are in contention. In order to do that, I need to refer to certain documents and some of the evidence in order to provide a background to the questions which need to be considered.
The respondents or bodies related to them, entered into written agreements with AVCS in substantially similar terms in 1990. They provided for amounts which were to be paid from 1 July 1990 to 30 June 1993. The agreements were to continue from year to year unless 12 months notice of termination was given. This could not be given before 30 June 1993. On that date AVCS gave notice of termination which was effective on 30 June 1994. There has been no agreement in place since then.
The agreement made between AVCS and the Director-General of Education for New South Wales contemplated the adoption of a sampling system; cl 4. Clause 5 provided that the Director-General, if requested by AVCS, was to notify it of the total Commonwealth Census Enrolment for the previous year for all participating schools within 30 days of such request. The Director-General was empowered to notify AVCS that a school would cease to be a participating school but the Director-General was not empowered to notify more than ten such schools during the term. Clause 6 provided a sliding scale for the amounts to be paid by way of remuneration. For the financial year commencing 1 July 1990, the Director-General was to pay AVCS 50 cents for each student as established by the 1989 Commonwealth Census Enrolments. The rates for succeeding years were 70 cents for each student for the financial year commencing 1 July 1991, 90 cents for each student for the financial year commencing 1 July 1992, and $1 for each student for the financial year commencing 1 July 1993. For the financial year commencing 1 July 1994 and each subsequent financial year during the term the Director-General was to pay AVCS the remuneration rate calculated in accordance with clause 7 for each student as established by the Commonwealth Census Enrolments in the previous year. Clause 7 provided that the remuneration rate payable to AVCS for the copying of broadcasts in the year commencing 1 July 1994 and in each year thereafter during the term was to be the rate for each student payable in the preceding year multiplied by the percentage change in the index number for the year ending 31 March immediately prior to each anniversary of the agreement. “Index number” was a reference to the All Groups Consumer Price Index Number for the average of the eight capital cities published from time to time by the Australian Bureau of Statistics. A participating school was a Government school administered by the Director-General. The agreement ceased to operate on 30 June 1994 so that the provisions of clause 7 were in fact relevant only to the year ending 30 June 1994.
Clause 9 dealt with sampling. The Director-General agreed that selected participating schools might be required to keep records in order to enable AVCS to sample the copying performed. The participating schools were at no time to exceed 1 per cent of the total number of schools administered by the Director-General or such other number as might be agreed upon by the parties from time to time. Only the schools selected for sampling were to be required to keep records. No participating school was required to keep records for more than one period in any consecutive ten years. The period was not to exceed one school term or such other period as might be agreed upon by the parties from time to time. The participating schools selected from the number of such schools were to be agreed upon by the Director-General and AVCS. Failing agreement they were to be determined by a statistician appointed by AVCS and the Director-General for that purpose. Records required to be kept under clause 9 were to be forwarded to AVCS at the expiration of seven days after the commencement of each period and thereafter every 14 days or such other period as the parties might agree upon from time to time. By clause 10 the records required to be kept were to be in the form specified in Schedule 1 to the agreement. The administering body was obliged, if reasonably required by AVCS to do so, to identify the person who made the record and advise AVCS of that person’s identity. Clauses 11 and 12 dealt with payment and clause 13 with some miscellaneous matters to which it is unnecessary to refer. I have not referred to the form of the record required to be kept by clause 9. In the circumstances it is unnecessary to do so.
For the purposes of this case the important thing to note about the agreement is the amount per student which was agreed upon. I have set this out earlier but the rate which applied was that which was determined pursuant to Clauses 6.05 and 7. At the time the agreement ceased to have effect on 30 June 1994 it was a little over $1 per student. I have referred to the other significant parts of the agreement in order to give an overall idea of what an agreement such as this must deal with. The exercise is not without its complications.
In addition to entering into the agreement with bodies administering schools, AVCS entered into agreements with universities and with colleges of technical and further education. These agreements are also relevant to the matters in question between the parties because it is submitted by counsel for AVCS that they provide guidelines or benchmarks which are relevant in the determination of the rate which is sought.
Ms Susan Bridge is the chief executive of AVCS. She has made two statements of evidence and has given oral evidence in the applications. Ms Bridge said that since 1990, AVCS had entered into agreements with all educational sectors of Australia including tertiary institutions. A list of agreements entered into is annexed to her first statement. The list shows that the commencing date of many of these agreements was 1 January 1990. With most TAFE colleges it was 1 January 1991. Some of the agreements were record-keeping agreements and some were sampling agreements. Further agreements were entered into with the universities which, for the most part, commenced on 1 January 1994. These were all sampling agreements except for three which were record keeping agreements. A notable exception to the general rule was the University of Tasmania which is governed by a record keeping agreement.
Ms Bridge said that, at the time of entering into these agreements, “per minute rates” were determined by negotiation. These varied according to the nature of the program. It was decided to categorise programs and to use different rates for each category. The categories for television were, “General”, “Ephemeral” and “Notified”. Category A programs were provided for only in record-keeping agreements. Programs classified as “General” were referred to in the various agreements as Category B or Category O. Those classified as “Ephemeral” were described in the agreements as Category C or Category N. Ms Bridge said that the general category for most television programs included documentaries, educational programs and feature films. She said that the ephemeral category included news, sport, series and serials, current affairs and light entertainment. A lower rate was negotiated for this category. It was less than one-third the standard rate. It recognised that some programs were ephemeral in nature and likely to be shown in class only once. The substantially reduced rate was instituted to meet cases where a program was copied simply to be able to show it to students at a more convenient time than the original broadcast time. Representatives from the universities assisted AVCS to categorise those programs which were ephemeral in nature and therefore should attract the lower rate.
In this respect it may be observed that the provisions of para. 153A(3)(a) of the Act (referred to in the proceedings as “the time shift provision”), which obliges the Tribunal to have regard to the extent to which copies of television broadcasts are made by, or on behalf of, the administering body solely for the purpose of enabling the material included in the broadcast to be seen and heard at times more convenient than the times when the broadcasts were made, appear to have been designed to mark a distinction between what the parties have called general and ephemeral programs.
Ms Bridge said that there was not any common rate established in the market or any comparable market so that the market for open-aired copying of broadcasts had to be determined by negotiation. The rate was negotiated with the Australian Vice-Chancellors Committee and the Australian Committee of Directors and Principals in respect of the university sector early in 1990. The Australian Committee of Directors and Principals was a body which existed when the binary system of tertiary education was in force. It was an association of directors and principals of colleges of advanced education. After the mergers which occurred in the late 1980s and the early 1990s, the Committee ceased to exist because the colleges were absorbed into the university sector. All universities are represented by the Australian Vice-Chancellors’ Committee.
Ms Bridge said that the rates per minute of the programs copied established by negotiation with the universities were, so far as they were relevant, $2.50 per minute for general television programs and 75 cents per minute for ephemeral television programs. The rates were adjusted in accordance with movements in the Consumer Price Index. For 1995 they became $2.82 per minute for general television programs and 85 cents per minute for ephemeral television programs.
It is to be observed that the rates referred to by Ms Bridge are not rates per student but rates per minute of copied program. When transposed into rates per student they become very much higher than the rates which were payable under the agreement in respect of schools which were of the order of $1 per student. AVCS has relied heavily on the university rates as a reliable guide to what the outcome of this case should be. But it recognised the vast disparity between the university rates and the school rates. The application of the university rates would have yielded figures of well over $20 per student, an increase of 20 or 25 times over the rate of $1 or so which applied in relation to the schools up to the end of 1994. Originally the AVCS claim was of the order of $15 per student, later it was reduced to the figures shown in the following table:
1994-95 $2.38 per FTE
1995-96 $3.74 per FTE
1996-97 $5.10 per FTE
1997-98 $6.46 per FTE
1998-99 $7.82 per FTE1999-2000 $7.82 + CPI over previous year.
(and following)
The adoption of these rates would still represent an enormous increase over the 1990 agreed rates.
The abbreviation “FTE” is for full time equivalent student. The manner in which these figures have been arrived at is set out in counsel’s submissions. I do not refer to the detail of these. Counsel said that it was submitted that the figures represented a significant discount on the value established by the university rates. They said that the only comparable rates were those for universities and TAFEs. These were for general programs $2.82 per minute and for ephemeral programs 85 cents per minute for the calendar year 1995. Counsel said that in the rates which were sought no CPI allowance was made in the first five years nor was there any “catchup” in year 6. Assuming a 3 per cent CPI increase per annum from 1994-95 (which may now be somewhat too high) this was a further discount on the result of the tertiary rate. It is to be emphasised - and I have mentioned this - that, in making these submissions, counsel have adopted the university rates as providing proper guidance as to the rate which should be applied.
Counsel for the respondents, on the other hand, submitted that the university rates were not the appropriate rates to be applied. Their reasons for this will emerge in due course after I discuss some evidence. They said that the proper rate was the rate agreed upon in 1990 between AVCS and the bodies administering schools. Relevantly that rate was $1 per student or thereabouts. Their primary submission was that that rate should not be increased because it was the result of agreement between the parties. It was the going rate upon which the parties had agreed. They ought not be permitted to depart from it. Counsel’s secondary submission was that, if the rate was to be increased, it should be increased by a comparatively small margin above the agreed rate of approximately $1.
It is to be seen that the parties are in substantial difference. This is a pity because there were negotiations, of which there is evidence, which took place prior to the hearing which came close to resolving the differences between them. Both sides wanted evidence of these negotiations in. Each seeks to take something from them.
It is therefore convenient now to deal with the evidence of the negotiations. According to Ms Bridge, they took place in 1993 and 1994. She said that late in 1993 she met privately with Mr Kyrios, Chairman of the Australian Education Council Working Party on Copyright, to discuss the progress of the negotiations. The basis on which the meeting was agreed was to discuss rates that might be affordable to the respondents in a setting where neither Mr Kyrios nor Ms Bridge was purporting to act as a representative of their respective organisations. They wanted to discuss the matter informally in the hope that their discussions might lead to the settlement of the matter. The object was to explore whether formal agreement was likely to be reached. Ms Bridge said that, at the meeting, she raised for consideration a set of annual per student rates that rose from $1.30 to $3.20 over five years. Mr Kyrios proposed rates that rose from $1.30 to $2.65 over five years. It was agreed between Mr Kyrios and Ms Bridge that they would attempt to persuade the respondents and AVCS respectively to accept the rates proposed by Mr Kyrios. In a conversation which took place on 18 May 1995 they agreed to release each other from any obligation that might have arisen in relation to the meeting that would prevent an account of it being tendered in evidence before the Tribunal.
Ms Bridge said that, after the conclusion of the negotiations, AVCS wrote to the respondents offering an agreement under which the amount of remuneration payable was to be:
1995 $1.30 per student
1996 $1.60 per student
1997 $1.90 per student
1998 $2.20 per student
1999 $2.50 per student.
For each subsequent financial year during the term, the per student rate payable in the preceding year was to be multiplied by the percentage increase in the CPI. Ms Bridge said that the offer to which she referred was not to be treated as a comparable negotiated rate. It was a compromise proposal for rates lower than the established comparable rates referred to in her statement. She said that AVCS was prepared to accept a lower rate in order to avoid the delay, uncertainty and costs of Copyright Tribunal proceedings and also to enable AVCS, which was a new copyright collecting society, to concentrate on developing its range of statutory and voluntary licensing schemes.
It is to be noted that the rates which were so nearly the subject of agreement between Ms Bridge and Mr Kyrios were considerably lower than those which AVCS now seeks.
In the course of Ms Bridge’s oral evidence, I expressed some surprise about the rates which were then being claimed. The top rate was $15.80 per student. I said to Ms Bridge that I did not understand why AVCS had moved from the figure of $2.00 plus that was mentioned by counsel for the respondents a little earlier to something that was six times greater. I said that I had not understood it and asked to have the matter explained. Ms Bridge said:
“Yes, your Honour, over the course of the last two years we have learnt quite a bit about what it is about, what the value of this is in the hands of the educators and in the hands of our members, and in the course of the preparation for the case we went and - perhaps we should have done this years before, but we did not, we went to see the members and asked them about the way in which they use AVCS returns and how they affected their business and how important it was to them, that would have been a sensible exercise years ago but it wasn’t undertaken, we saw our role as simply to perform that sort of accounting function. But having looked at it in more detail and also having looked at the educational value, and formed a judgment about that, we could see that the rates that we originally set with the universities, and that had been in operation with the university sector and the TAFE sector, weren’t unrealistic rates. I mean, they may be very difficult for the schools to come to terms with because they had been paying a dollar but then we said the dollar was wrong and this is an expensive and valuable thing and we should be pursuing returns to the copyright owners that we now say is a reasonable one. In fact we say that $18 is reasonable but in the course of them having to make an offer and hoping that the Tribunal action will be avoided, even at the last minute, we came down from that but we do not say that the figure is unreasonable, we have got a problem with what the result of it will be on the schools’ budgets and we hope that the educational authorities will recognise the value and will allocate the budget for this, will allocate the resources for it.”
Ms Bridge’s evidence continued:
“Look, it may not have anything to do with the case but it seems to me that if you are conscious of that risk, you are running the risk of undermining what so far appears to me to have been a very successful operation, I mean, you are doing it with your eyes open, the whole board is, and jeopardising the very work that has been done over the years to build this organisation up into something that is quite desirable and valuable, I just do not understand it, I really am lost?---Well, your Honour, we would have done a deal at $2.50 but the educational representatives ultimately rejected it.”
Mr Kyrios said that he met with Ms Bridge privately on two occasions to explore and determine the best possible rates that could be achieved through negotiation. At these meetings he said to Ms Bridge that the meetings were to be without prejudice and for the purpose of exploring how close the parties could get through negotiation. They agreed that they were meeting on a “one on one basis” and not as representatives of the respective organisations they were representing. He referred to the meetings as “the informal meetings”. Mr Kyrios said that he had used informal procedures such as this in previous negotiations with representatives of copyright owners. He had found that such meetings removed some of the posturing which takes place at more formal meetings. Their purpose was not to reach agreement but to determine the basis on which agreement might be achieved.
Mr Kyrios said that, during the first of the informal meetings, Ms Bridge said that AVCS wanted $3.20 per student but would accept a graduated increase over a period of time to arrive at that figure. She also said that AVCS might consider a graduated increase over a period of five years starting at $1.30 and increasing at 50c per year to $3.20. Mr Kyrios said that he did not believe that the Treasury would fund such increases. He asked whether it was not possible to arrive at more reasonable figures. Ms Bridge said that AVCS had already significantly discounted the rate it was seeking. The only reason AVCS was prepared to offer such discounting was because the schools sector was AVCS’s biggest customer and provided significant moneys through the licence agreement payments. Mr Kyrios said that he would be prepared to consider putting to Treasury a deal that involved graduated increases commencing at $1.20 to reach $2.00 by June 1998. Ms Bridge said that her board would not approve such rates. She repeated that significant concessions had been made by allowing graduated increases. Mr Kyrios said that it was from these discussions that figures of $1.30, $1.60, $1.90, $2.20 and $2.65 arose.
At the second meeting these figures were again discussed. He recalled saying that the Treasury would not be prepared to fund the department. He added, “We have quite serious financial demands. Any copyright agreement we enter into is strictly dependent on funding being available by Treasury and we do not and cannot top up any shortfall”. Mr Kyrios said that any agreement was dependent on three main “issues”, namely, that Treasury funded the full cost, that all the State Catholic and Independent school sectors were prepared to agree, and that the actual terms of the written agreement were acceptable. He said that there were a number of matters of substantial importance apart from the rate per student. These were the basis of calculation of student numbers, access to sample records and the savings clause statement. He said to Ms Bridge that the issues of how to calculate student numbers accessed by schools to sample results and records and a matter referred to as “the savings clause/statement” were all important and needed to be resolved before any agreement could be entered into.
Mr Kyrios said that, on 24 May 1994, he said to Ms Bridge that he was prepared to recommend that the New South Wales Department of School Education and the other respondents agreed to rates which he proposed. These were the rates earlier referred to commencing with $1.30 per student for the 1995 year and concluding with $2.50 per student for the 1999 year. There were also rates agreed by reference to the CPI in respect of subsequent years. Mr Kyrios said he was prepared to recommend the acceptance of these rates subject to receiving counsel’s opinion in relation to whether the likely rate determined by the Copyright Tribunal would be more or less than the rates which he proposed. Ms Bridge asked him when he expected to receive counsel’s opinion. Ms Bridge also said that AVCS was seeking counsel’s opinion as to the rate the Tribunal was likely to arrive at.
Mr Kyrios said that it was decided to seek counsel’s advice as to whether on the available material the proposed rates were likely to be considered as appropriate by the Tribunal. The advice was sought and subsequently obtained. Mr Kyrios did not state the outcome of the advice but I was informed during the hearing that the effect of the advice was that the Tribunal would be unlikely to determine rates as high as those which Mr Kyrios was prepared to recommend. I realise that I was informed of the position so that I would have a compelte picture of what had transpired. I do not, however, regard the information as to the nature of counsel’s opinion as relevant and I have endeavoured to put this matter aside.
The parties had reached the stage where an agreement had been prepared which was apparently satisfactory both to Ms Bridge and Mr Kyrios. Copies of the agreement was sent to numbers of the educational bodies for execution. After it became clear there would be no agreement, advice was sent recommending that the agreement not be signed. The documents in relation to this matter are in evidence but I do not refer to the detail of them.
The rates agreed upon between AVCS and the schools in 1990, the rates agreed upon between AVCS and the universities in 1990 and 1994 or thereabouts, and the rates agreed upon by AVCS and the TAFE colleges in 1991 and later are, in my opinion, the guide posts which there are to assist the Tribunal in the difficult task which it has. There is, as mentioned, a substantial disparity between the rates agreed upon by the universities and TAFE colleges and those agreed upon by the schools. If one looks only at the rates there is a wide gulf between the two.
Also of relevance, but to an extent which I shall indicate in more detail later, are the negotiations which took place in 1994 between AVCS and the schools but which failed to materialise in any agreement. I do think that these have relevance but the nature of it I prefer to leave until I have referred to some principles and some more evidence.
In the Copyright Agency case earlier referred to, which was decided in 1985, I endeavoured to state principles which would guide the Tribunal in reaching a conclusion in a matter of this kind. In that case there were no guide posts whatsoever and the task became a most difficult task of estimation. I do not wish to refer to the Copyright Agency case at length but there are some statements in it which are of direct relevance to the present problem; see my discussion at 181-183. I said (at 183) that I thought a proper analysis of what Lord Wilberforce had said in General Tire & Rubber Co. v Firestone Tyre & Rubber Co. Limited [1976] RPC 197 and also of what Fletcher Moulton LJ had said in Meters Limited v Metropolitan Gas Meters Limited (1911) 28 RPC 157 at 164-5, disclosed that the preferred approach was to see first of all whether there was a normal rate of profit or royalty. If the circumstances were comparable, this would establish a going rate which was the best guide to what the parties themselves would have agreed upon if they were treated notionally as a willing, but not anxious, licensor and a willing, but not anxious, licensee. In cases where the evidence did not disclose a going rate of profit or royalty, it might nevertheless be possible to approach the matter upon the basis of a hypothetical bargain. There might be evidence which would enable the court or tribunal to conclude that in the circumstances of the instant case willing but not anxious parties would have arrived at a particular figure for a licence. But I said that the evidence would need to be carefully scrutinised to ensure that comparisons with other cases did not lead to a result which was artificial.
I also said (at 183) that, if the notional bargain approach were not available or thought to be fallible in the circumstances of a given case, the task became one of judicial estimation, the court or tribunal doing its best in the circumstances upon the basis of the evidence which there was. I remarked that this was always a difficult task but by no means an uncommon one. It follows that there are three stages. If there is a going rate, it will normally be applied or at least treated as providing strong guidance as to the outcome. If there is not a going rate, it may be possible to approach the matter upon the basis of a hypothetical bargain. But care has to be taken that this does not lead to an artificial result. If that approach is not thought to be helpful, one must fall back on judicial estimation and do the best one can.
Here both parties contend that this is a case where there is a going rate. AVCS contends that the going rate is a rate of the order of that being paid by the universities and TAFE colleges under their agreements. It is to be observed that that rate would result in a very much higher payment to be made than would be the case if I were to adopt the rate now claimed in counsel’s submissions. Counsel for the respondents, on the other hand, claim that the going rate is the rate upon which these parties have themselves agreed, namely the figure of $1 or so per student, which is provided for in their agreement. Thus, the parties have adopted extreme positions even if one does allow for the reductions made in the AVCS claim since it was first made. As earlier remarked, the gulf between them is wide. The margin narrows if one has regard to the negotiations which occurred in 1994. But one cannot possibly say that those negotiations, so far as they went, ought to lead to the conclusion that there was a going rate of the order so nearly agreed upon in the negotiations between Ms Bridge and Mr Kyrios. There was no agreement; it is plain from the evidence that a number of the participating schools or school authorities were quite unhappy with what had been proposed in the negotiations; there was no consensus. What, if anything, can be taken from these negotiations? I have thought about this matter at some length. Both Ms Bridge and Mr Kyrios, who I accept as witnesses of truth and reliability, explored the possibility of a settlement in the utmost good faith. They saw the common sense of a settlement which would avoid the lengthy delays of a hearing in the Tribunal and the consequent expense to the parties that that hearing would involve. But for various reasons the negotiations aborted.
Both Ms Bridge and Mr Kyrios are substantially experienced in this area. Ms Bridge has had a long experience in copyright and is familiar with negotiations which have gone on in numbers of copyright areas. Mr Kyrios has played a leading role in the negotiations which have taken place on behalf of the New South Wales Department of Education, and indeed on behalf of other departments of education as well for a great many years. He made submissions on behalf of those organisations to the Copyright Law Review Committee on more than one occasion.
Both Ms Bridge and Mr Kyrios have a keen awareness of what the realities of problems such as this are and each has a keen awareness of what is practical and possible and what is not. It therefore seems to me that the settlement negotiations between the two have a degree of relevance in that they indicate to the Tribunal that these two most experienced people thought that the area in which to negotiate was in the range, or close to the range, of the figures which they discussed. I would not hold either to the precise figures which were nearly achieved. But I think that there is much to be said for the view that their negotiations give good guidance as to the area or range in which the Tribunal’s determination should fall. Later I shall refer to the evidence of Mr Collis-George which also provides support for this view.
Before I develop what I have said, I need to refer to some further evidence. Mr W.T. Chapman is the Executive Director of the Association of Independent Schools of New South Wales. The Association is a member of the National Council of Independent Schools Association. Each State has an association which is similar to the New South Wales Association and each of these associations is a member of the national body. Mr Chapman said that he was authorised by both the Federal body and the State association in relation to copyright issues. He had performed this function ever since the formation of Copyright Agency Limited and negotiations with that body in the early 1980s. In this connection he works “co-operatively” with a task force on copyright established by the Ministerial Council on Education, Employment, Training & Youth Affairs. Mr Chapman is not formally a member of the task force but is invited to attend meetings and to take part in negotiations in which it is involved. After the termination of the various agreements, Mr Chapman asked to be present at meetings of the task force with AVCS. The chairman of the task force is Mr Kyrios earlier referred to.
Mr Chapman said that at no stage did Mr Kyrios have authority from the national federation or, so far as he knew, from the task force to enter into any agreement with AVCS without reference to those bodies. Mr Chapman said that he did not at any stage give him that authority. He referred to conversations he had with Mr Kyrios. I do not find it necessary to refer to the detail of these. I would interpose, however, to say, that Mr Kyrios does not suggest that he had authority to negotiate on behalf of the task force or any of the schools or administrative bodies concerned in the application. Neither does Ms Bridge suggest that she had that authority from AVCS itself. That was not the point. The informal negotiations which Ms Bridge and Mr Kyrios conducted were conducted in the hope that they themselves could agree on a figure which might be capable of acceptance by the two bodies. They acted in good faith in an endeavour to bring the matter to completion without the need for the lengthy and expensive hearing in the Tribunal which, although for understandable reasons, has had to take place.
Mr Chapman said that he discussed the negotiations on a regular basis with other members of the national body. He said that it was decided that in the absence of strong reasons to the contrary, there should be no agreement to payments in excess of $1 increased annually by the consumer price index. He believed that the consensus of the task force meetings was the same. He said that he formed his opinion that the amount should be limited to $1 together with Consumer Price Index increases because he did not accept that the university rates were relevant. They had been negotiated without “our knowledge”. He also thought that there was a difference because the universities represented far fewer students than the schools. He considered that the only relevant base rate was the rate which had been agreed in 1990 and that any increase proposed should be considered against that rate.
Mr Chapman said that, when a figure of $2.60 was put to the task force, it was rejected. He said that, upon the basis of the views expressed around the table, it was his understanding that the basis for rejection was the same as his own. Mr Chapman rejected it on behalf of the national association because no valid reason had been shown for a 260 per cent increase on the rate that applied in the previous year based on the rate agreed upon in 1990. He added that the consensus of the meeting was that such a figure should not be agreed but in case this view were ill-founded, the opinion of senior counsel should be sought to determine whether it was likely that the Copyright Tribunal would find that the rate proposed by AVCS was reasonable or appropriate.
Mr Chapman said that, for the Copyright Tribunal to determine the appropriate amount, it was important, in his view, that “it assesses the meaning of ‘per student’”. Mr Chapman said that, if a wide definition of the term were adopted, if an order were made by the Tribunal for payment of a particular amount, that amount would be greater than if a narrower definition of the term “student” were to be adopted. He said that negotiations had been conducted between the representatives of educational institutions and AVCS with respect to the proper definition of “student” in respect of all the educational institutions. He said that the two differing positions had been:
(a)either that rates should be based on a head count of students; or
(b)that, for the purposes of payment in respect of the use for students of taped broadcast material, regard should be had to the fact that some students were full-time and some were part-time and that a counting should therefore be on the basis of full-time equivalent students.
The former view was, so he said, that of AVCS; the latter the view of the task force.
Mr Chapman is contending for a weighting of part-time students so that the actual figures represent the equivalent of full-time students. As I understand the position now, there is no issue between the parties about this matter. In case there is, however, I express the firm view that the amount per student should be calculated on the basis of full-time students or the equivalent of full-time students. In other words, it is not a matter of counting heads. It is a question of equating part-time students to full-time students by reference to the statistics to which Mr Chapman referred from the Commonwealth Department of Employment, Education and Training. That, in my opinion, is the only reasonable way for the matter to be approached unless the exercise of equating part-time students to full-time students proves to be impractical because of the complexity of the task or for any other reason.
In this respect Mr Chapman referred to some difficulty in obtaining statistics in respect of independent schools. He said that aggregated statistics were not published regularly but appeared in the statistical index of the Annual National Report. Mr Chapman thought that the Department could probably provide head count figures but these did not take into account whether or not students were full or part-time.
My preferred view is that any problem in ascertaining equivalent full-time student numbers for independent schools should not stand in the way of adopting a formula based on equivalent full-time students rather than doing a mechanical head count of them. If the exercise is impractical, the alternative would be to discount the overall amount awarded to take into account the fact that some students are full-time and some are part-time.
The ultimate solution to this problem must be practical and achievable without those responsible for its administration having to ascertain and then check uncertain numbers and do complex calculations. The more straightforward the solution is, the easier the decision will be to apply. In due course I will need to discuss the difference that needs to be accorded to general and ephemeral programs. But as I understand the approach which the parties now take, they do not wish any distinction to be drawn ultimately between the two types of programs. What they wish is that the fact that there are ephemeral programs, or programs which are taped for time shift purposes and are covered by s.153A of the Act, to be taken into account as involving a cheaper rate than those which are in the general category. That is another matter which is better done in an overall exercise which takes that matter into account and allows a proper weighting or discounting for the fact that some programs are of temporary value only.
I make it clear at this point that the rates which I have decided upon are based on students being full-time and not part-time. In order to apply them, part-time students will need to be equated to full-time students. If the course I have decided upon is impractical, I shall make some reduction in the rates to allow for the fact that some students are part-time. In this regard I should mention that I shall follow my usual practice of stating conclusions but not making orders until the parties and their legal advisers have had an opportunity of considering my reasons. Any necessary adjustment to the rates as a consequence of this matter can be considered when final orders are being made.
Mr Chapman was not cross-examined and gave no oral evidence.
I should refer briefly to the evidence of Ms Christine Wise who is the Assistant Secretary for Education and Policy of the Australian Vice-Chancellors’ Committee. She has held this position since 1 March 1990. Prior to that date she was the assistant secretary to the Australian Committee of Directors and Principals, a position she had held since June 1986. Ms Wise was involved in negotiations between the Vice-Chancellors’ Committee and a committee of copyright owners and later the AVCS. All 37 Australian universities are members of the Vice Chancellors’ Committee. They represent approximately 575,000 students. In contrast it may be noted that the number of pupils at Australian schools is of the order of 3,000,000.
Ms Wise gave a detailed account of the negotiations which led to the various rates which were fixed for the universities. Her evidence is important but I do not refer to the detail of it because the critical matter is the amount of the rate or rates fixed in respect of the universities by the agreements which were entered into. There is no doubt that there is a substantial disparity between those rates and those agreed upon in respect of the schools somewhat earlier. The disparity is so great that I could not help remarking during the hearing that I thought it was quite extraordinary.
In the course of their submissions, counsel for the respondents advanced reasons why there was a difference between the situation of schools and universities which, so counsel submitted, tended to explain the difference. I have taken these submissions into account but I do not find them convincing. I think that the essential reason why the disparity exists is that there was no consultation by the universities with the schools when the university agreements were entered into. Ms Wise said that she did not discuss the school rates with any representative of the school sector before the university agreements were entered into. Nor was there any correspondence between any representative of the schools and the universities concerning these matters. Thus each of these educational sectors acted independently. I think it likely that, if rates such as were agreed to be paid by the universities, had been suggested to the schools, there would not have been any agreement because the schools would have said that they were beyond their means. They would have claimed an inability to meet them and either brought the matter to the Tribunal at a much earlier stage or given up copying broadcasts of programs which they would otherwise have used for their pupils.
Notwithstanding these various considerations, I do not consider that the matters to which I have referred satisfactorily explain how the disparity came about. But, whatever the reasons for the disparity, the important thing is the amount of the rates. Contrary to submissions made by counsel for the respondents and also the evidence of Mr Chapman, I am satisfied that the rates are relevant but they are by no means determinative or conclusive of what should be done.
Ms Wise was not cross-examined and did not give oral evidence.
Mr M.J. Orr is seconded as the special projects officer - “Network Learning in Classrooms of the Future”, a section within the Directorate of School Education in Victoria. He was requested to provide comments in relation to the developments currently taking place in Victoria in relation to teaching methods.
Mr Orr dealt first with the Internet. He thought that this was one of the most important technological developments in recent years. He said the most popular services available through the Internet were electronic mail which enabled teachers and students to communicate with colleagues and mentors locally and around the world, computer conferences or newsgroups through which people joined ongoing group discussions on a topic of interest, and the World-Wide Web which enabled teachers and students to gather information from thousands of information warehouses which were scattered around the world. Students and teachers could also publish their work to a global audience via the World-Wide Web. Mr Orr said that these services provided a mechanism for supporting individual teachers and students as they conducted research activities or prepared lessons. They provided exciting new possibilities for students from many locations to work together on collaborative projects and for networks of teachers involved in curriculum and professional development.
Mr Orr went on to discuss the Internet at some length but I do not refer further to the detail of his evidence in this respect. He next referred to the global classroom project which had been launched in 1995. He said that it was helping schools take advantage of the new learning opportunities made possible by computer technology and the Internet. Its main aim was to involve students in a world of learning which was not limited by traditional constraints or timetables and classroom resources. During 1995 the project enabled students from approximately 100 Victorian government schools to take part in network learning activities involving colleagues and mentors around the world.
Then there were what Mr Orr described as special projects. He said that he understood that many resource organisations with well-established educational programs planned to set up pilot Internet projects in 1996-97 to facilitate the development of their webb sites. Some organisations were exploring ways of using the full range of electronic media and engaging students in this work using digital cameras, interactive CDs, databases using e-mail, electronic information maps, and “trialing” on-line information transfer systems which managed and analysed data.
As to the future, Mr Orr thought that, with the prospect of moving from analogue to digital recording, there would be a convergence of television, VCR, computer and digital recording technologies into a single living room Internet communication, information and entertainment unit. It would be connected to the Web by optical fibre and/or satellite and receiving and recording information, video, film and music on-line from a provider to be accessed instantly or at some later time. He said that if this level of access were achievable, the need to copy might decrease significantly. Mr Orr said that, in his view, the demand for converging technologies to increase interactivity and user friendly software to facilitate access would guarantee that the pace of change would not abate in the near future. The building of structure into Web sites such as catalogues and indices would, he believed, be attractive to those who required rapid access to a bank of information specific to an area of knowledge. Mr Orr said that it was difficult to foresee the full impact of cable technology and the provision of instant access to entertainment, information and communication. He believed, however, that users would pay for these services and that free to air services would diminish by comparison. He believed that the pace and nature of change surrounding the Internet was impossible to forecast as it was limited only by the imagination of the users and the technology which drove and supported it.
Mr Orr was not cross-examined and did not give oral evidence. His evidence is as to the future. He has the expertise to express an informed view but the sort of things he is forecasting, although they may well happen, will not happen at least in an overall way in the next year or two. Anyone who prophesied what might happen after that would be brave. There has been so much development in the technology which affects this area in recent times and the progress has been at such a rate that it is impossible to deny that quite revolutionary changes may be upon us all quite soon. But I have to be cautious. I cannot decide a case which is largely based upon what has happened up to now upon what might happen in the future. It is something that the parties themselves need to bear in mind. It may be something which warrants inclusion in the determination of the Tribunal, or in any agreement which arises as a consequence of its determination, of a provision which would enable either party to bring the matter back to the Tribunal within the term of what might otherwise be a lengthy period.
One change which is coming about but which Mr Orr does not mention is cable television. It seems likely to me that this will have an impact on the use by all manner of people of free to air programs. There is evidence of a schools channel being provided by one of the networks. Again, however, this has not yet developed in any significant way. This matter was mentioned in the evidence of Mr Collis-George to whose evidence I now go.
Mr Collis-George was called in the AVCS case. He is a consultant in the pay television industry specialising in education television. One of his functions is to be responsible for a channel called the “Horizon Channel” which is carried on Optus Vision. It is a dedicated education channel. It went to air in September 1995. The channel is devoted entirely to education for all ages, children right through to adults. Broadcasts by the channel are not protected by the compulsory licence provisions contained in either Part VA or Part VB of the Act. Copying without a licence would involve infringement of the film rights and the reproduction right in respect of literary and musical works. Mr Collis-George said that it was possible to tape from cable just as it was to tape free to air broadcasts.
Mr Collis-George did not know whether any schools had joined the scheme. He said that Optus Vision maintained confidentiality as to its cabling and subscriber base. He had not been informed of the position himself. He said however that Optus Vision offered “schools by channel” free and to cable free along with two other channels, the community channel and one other education channel. He said that it was proposed to create another education channel. This was not operating at the moment. It was to be more what he described as a “chalk and talk style of channel”. As yet there was no Foxtel educational channel but Mr Collis-George thought that it was proposing to set up “chalk and talk style education channels.”
Mr Collis-George was asked generally about the likely popularity of education channels, the use of them and how generally he saw their future. He said:
“Well at the moment Optus Vision and Foxtel are offering somewhere between ten and twenty channels each; some of them are the same channels, some are exclusive; my channel is exclusive to Optus Vision. Each of those operators would hope to sign up about a million perhaps less subscribers over the next three to five years, delivered by cable to homes and offices and schools. In the US and Canada the number of channels on offer is now reaching 100 and there’s no reason why many of those channels will not in time come to Australia, so we may well be in an environment where there are up to 100 channels being delivered by satellite or cable to this market.”
Mr Collis-George said that Optus Vision was trying to move the channel, which was an Australian based channel, out of Australia and into Asia so that broadcasts would be received internationally from a number of countries including Australia itself. Mr Collis-George said that the current broadcast schedule under the contract with Optus Vision required the provision of seven hours of programming each day. The seven hour block was then repeated so that the channel was on air for 14 hours a day. That was to be expanded to a 20 hour service in September 1996. There would then be two periods each of 10 hours.
There was further discussion during the oral evidence about this matter. It is informative but I do not feel it necessary to refer to the detail of it. Certainly, however, Mr Collis-George’s evidence in this regard marks a matter that is likely to affect the future of this area of broadcasting quite considerably in the foreseeable future.
Until July 1995, when he took up his present position, Mr Collis-George was head of production for television of the Australian Broadcasting Corporation. He had held this position for one year. In all he was employed at the ABC for 22 years. His previous position was the head of the Children’s and Education Television Department. He occupied that position for four years. Mr Collis-George said that he was a member of the board of directors of AVCS. He had held the position since November 1992. He became deputy chairman in 1994 and is now chairman of AVCS.
The ABC is a member of AVCS. It is the owner of copyright in certain programs which are copied off-air by educational institutions under the broadcasts copying scheme. It has received and continues to received royalties from AVCS.
Mr Collis-George dealt at length with the importance of off-air copying to school educational broadcasting. I do not refer to the detail of this. But the importance and significance of it are established in any event by the extent of copying for educational purposes which is done by the schools. Plainly educators see appropriate television programs as a most useful tool in the teaching of children.
Mr Collis-George said that the royalties from the copying of programs administered by AVCS funded the administration, promotion, program purchase and program production of the ABC schools television service. Without royalties from off-air copying the ABC could not afford to provide a service of educational broadcasting for schools. All royalties from AVCS for off-air copying of any programs which were received by the ABC were directed to the schools television service. Any surplus of funding would be entirely directed towards the local production of schools programs which met the specific curriculum requirements of Australian schools. To date the royalties received from AVCS had been sufficient to allow the ABC to plan the production of 7.5 hours of local schools programs. Currently (1995) 350 hours of schools television were broadcast each year.
If the ABC were to receive more money from AVCS under the broadcast copying scheme, it would distribute all of the surplus funds for the following purposes:
(i)the production or commissioning of the production of local educational programs for Australian schools; and
(ii)the payment of higher broadcast fees to the producers of the programs from whom the ABC acquires the right to broadcast. This would help them recoup their production costs and create further schools programs.
Mr Collis-George said that the direct result of the ABC receiving more money under the broadcast copying scheme would be that more educational programs for schools would be made.
As I understand what Mr Collis-George has said, his hope and expectation from this case are that there will be more money to enable the making of more programs. No doubt this is a highly desirable object and is very much in the public interest but that is not the question which this case poses for decision. The question is what is equitable remuneration for the copyright owners represented by AVCS. The fact that a consequence of a higher award will be more programs because of the financial ability of the ABC to make them does not have anything to do with the question of what the worth, in objective terms, of the broadcasts and works shown in them are.
The balance of Mr Collis-George’s statement deals with the history of educational broadcasting for schools on the ABC and how it has been affected by the off-air copying scheme. Mr Collis-George deals with the matter in sections, the first being the events which transpired prior to the establishment of AVCS. He then comes to events after the establishment of AVCS. It was then that the ABC decided that it could fund the schools television service through AVCS. It considered that the first distribution should be employed in seeking to purchase broadcast rights and off-air copying rights for educational programs. As the ABC had the relevant copyright, it would then receive royalties from AVCS if the programs were copied under the broadcasts copying scheme. These royalties would enable the ABC to purchase further educational programs and thereby fund the broadcasting of educational programs for the schools sector. It was decided to purchase overseas educational programming because the purchase of rights for an overseas produced program was generally about ten times less expensive than producing the program in Australia. Mr Collis-George said that the off-air copying scheme administered by AVCS was the sole reason for the schools television service continuing “unabated” because the ABC did not have the funds to support schools educational broadcasting.
In late 1991 the ABC received its first payment of royalties in the sum of $500,000. This enabled it to purchase schools educational programs for the schools television service before the end of 1991 for screening in 1992. The royalties received from AVCS were used to make these purchases. The position was similar in the years that followed.
Mr Collis-George said that the ABC was committed to all of the royalties received by the ABC under the broadcast copying scheme being used to fund two hours per week day for 35 weeks a year of educational programs for the school sector. The total number of hours was inclusive of new educational programming for schools. The reference to new programs was a reference to the number of hours of programs which had not previously been broadcast in Australia. In addition to funding the programming, the amount of the royalties received funded the administration of ABC Education TV, supported materials to accompany the educational programs and, after satisfying these various expenditures, made available a surplus for the production of Australian educational programs “tailored for the schools sector”.
There is a section of Mr Collis-George’s statement dealing with Australian educational productions. I have read this and taken it into account, but I do not set out the detail of it. He then deals with the relevance of the schools television service. He said that the ABC was committed to providing a schools television service that was directly relevant to the curriculum needs of schools throughout Australia. The task was made easier by the introduction of a national curriculum which was being adopted “in varying degrees” throughout the States and Territories. He said that, before the ABC purchased schools programs, ABC Education TV sent preview tapes to curriculum consultants in the Education Department for their consideration and evaluation. He said that the manager of ABC Education TV had many meetings with curriculum consultants from the States schools systems during each stage of the production process to ensure that the programs were directly relevant to the educational needs of schools. ABC Education TV also examined which of its programs were copied by the school sector under the off-air copying scheme in order to ascertain the programs which were most relevant and useful to the sector.
Mr Collis-George referred to some additional educational resources which were provided by the ABC and concluded with his views concerning the future of the schools television service. He emphasised his previous statement that the establishment of the off-air copying scheme had enabled the ABC to continue to provide a schools television service. He said that the ABC wished to continue to provide the best possible television service for the school sector. To ensure this it was necessary to maintain a continuing supply of quality overseas programs for purchase from as wide a range of suppliers as possible. An increased fee would enable the ABC to pay a higher purchase price and maintain and augment the current level of service. It would also enable a continuation of Australian produced curriculum specific television programming for schools.
In the course of his cross-examination, Mr Collis-George was asked questions about a letter dated 5 May 1993 written by him to Ms Bridge. Mr Collis-George was, of course, still then with the ABC. He began his letter by referring to a discussion at a board meeting concerning the “schools strategy”. He said that he had been asked to reiterate the issues which he raised. He said that these essentially concerned the question of the price the schools might pay and the general strategic approach to this sector. He referred to the fact that the schools were paying $1 per student per annum during the current year. He referred also to the fact that this had risen from 50 cents per student at the start of the agreement some years ago. He continued, “Clearly they should be able to pay more than $1 but how much more? Could it rise to $2:00 which I believe is about right or the $4:00 that you have in mind, and over what timescale? Can we look at other markets e.g. photocopying, education support material, e.g. books, videos, to see if there is any comparison.” The emphasis is added.
Mr Collis-George said that it needed to be borne in mind that “at a certain point determined by price and convenience” the school sector had alternatives to the current broadcast/AVCS set up. The alternative to paying $4 per student, that is $12 million per annum, was to establish their own schools video production. $12 million would fund 60 hours of new production each year with very good production values. In fact the schools could fund an adequate service for half this figure.
Mr Collis-George also said, “I am also concerned that the AVCS presents a far too aggressive profile to the education sector. Bureaucrats in public sector organisations should not be pushed into corners. We should explore a wide range of tactics.” Mr Collis-George concluded his letter by saying that what he had said represented the gist of what he had said at the meeting.
Mr Collis-George was cross-examined about his statement in which he asked whether the rate could rise to $2 or to $4. He said this was the view that he put. He denied, however, that it was his view and added, “I’d like to amend my last answer. It’s a view that I put to the board, it was not my view.” Mr Collis-George’s evidence proceeded as follows:
“THE PRESIDENT: Look, Mr Collis-George, I want to know. When you said, ‘which I believe is about right’, did you believe it was about right or was the statement false, because they are the two choices?---In strict sense this statement is false.
So, you are making a false statement?---To - in an argument on the AVCS board.
Have you been quite fair to yourself, do you think? Because I am going to have to write a judgment about this and I have to deal with this sort of thing. I want to be sure you understand what has been put to you. It is quite serious and I want to be sure that I understand the situation?---Yes. Can I explain?
You may explain?---My concern at the time was that the chief executive [Ms Bridge] needed boundaries placed on her in her negotiations with the schools, and I was in effect negotiating with her and possibly other board members across the table about the correct position that we should take. So, I put to them, and then later confirmed in writing, a position that was more extreme than the one that I actually hoped to obtain.
But you were writing her a letter after the board meeting which is referred to in the first line, and you were writing her a considered letter giving her what seems to me to be advice, and you said amongst other things:
Could it rise to $2, which I believe is about right-
Was that not your honest view or were you misleading her?---To a certain extent I am misleading her because I wished to get a negotiated position.
Well, that is your answer, is it?---That was what was in my mind when I was confirming what I said at the board - in discussion at the board.”
Later Mr Collis-George said that the words he had used were false. They represented a negotiating position which, as I understand his evidence, he wanted to achieve but not his real view. He said that the statements were false, if taken as statements of what he believed the position to be.
I found Mr Collis-George an impressive witness. In most respects he gave his evidence helpfully and I would conclude reliably. I think his problem in relation to the letter of 5 May 1993 was that it placed him in a false position because of the claims which AVCS had made. He was speaking about a figure of $2, or perhaps $4, yet the claims were originally in the order of $15 per student. This was the position at the time he gave his evidence. The reduction to $7.82 per minute did not occur until counsel addressed after the evidence had concluded. Frankly, I have great sympathy with Mr Collis-George who was obviously doing his best to defend a position that was indefensible. I think what I should do is to conclude that in 1993 he thought that a rate of $2 a student was a fair thing. He may have thought this because he thought it was realistic in the sense that it was the most that could be achieved consistently with a continuing relationship with the schools. He is a realist. He realised that if he negotiated a rate that was beyond the schools’ capacity to pay or the willingness of governments to pay, he would negotiate copyright owners including the ABC out of the benefits which they were receiving.
This is something which hard-headed negotiators face up to. It was precisely the same sort of consideration that both Ms Bridge and Mr Kyrios took into account when they had their discussions in 1994. They brought, as did Mr Collis-George, a sense of reality to the position that could take AVCS away from the temptation of pinning its faith on the university rates as a guideline, really as determinative, of what the rate should be. What I take from Mr Collis-George is that he thought in 1993 that $2 was about right. His evidence in this respect is consistent, subject to some differences in amount, with the evidence of both Ms Bridge and Mr Kyrios. The three of them, at least in 1993 and 1994, had much the same view.
It is, however, fair to say that both Ms Bridge and Mr Collis-George tended to distinguish in their own minds between what in absolute terms equitable remuneration should desirably be and what in realistic and practical terms was achievable. The distinction can be perceived but in the hard world of negotiating where parties discuss whether one will buy and another will sell what has to be taken into account is the willingness of the buyer and the ability of the buyer to pay a certain price. If the buyer is not willing or is not able, business cannot be done. I could fix a figure that I thought was fair and reasonable but which would bring the whole of this arrangement to an end. Frankly, that is what, in my opinion, the effect of the AVCS claim will be if it is met in full. Nobody would pay it and the whole scheme will collapse. That is the last thing that anybody wants.
In any event my task is to assess equitable remuneration for copyright materials used by the schools under a compulsory licence. There is in fact no question of unwillingness to deal. The parties must deal. However, difficult the task, I must fix equitable remuneration. And I must fix it, so it seems to me, not in a vacuum but in the setting and context of all the surrounding circumstances. In my opinion, it is relevant and appropriate for the Tribunal to take into account realities such as the capacity and willingness of the schools to pay. Parties who were willing but not anxious to deal would clearly do so. The Tribunal should not be in any different position.
Mr Collis-George was also asked about the statement in his letter that AVCS presented a far too aggressive profile to the eduction sector. He resiled from this also, but I do not regard this statement as particularly important in the circumstances. It does not have the significance or the relevance which the statement about rates has.
Mr J.T. Alexander is the chief executive, Research Division of AGB McNair Pty Ltd. Mr Alexander said that in 1990, AVCS requested AGB McNair to develop an audio-visual copying sampling scheme in schools consistent with the print copying scheme which had been operating since 1988. The request was made after AVCS had had discussions with the Australian Education Council. Mr Alexander said that there were clearly efficiency and cost benefits to both the Australian Education Council and AVCS in co-ordinating a data collection system for audio-visual copying with the existent print copying scheme. Mr Alexander described in detail how the sampling was done.
One of the matters that concerned me about the sampling system which has been in place is the question whether it was able to distinguish sufficiently well between schools which copied many television programs and schools which copied comparatively few. It occurred to me that in between these two extremes, there must be a variety of situations which would reveal differences in the extent of copying done at different schools. One thing that occurred to me was that independent schools with more resources or State schools in more affluent areas with active parents and citizens associations might be able to afford more equipment to enable more copying to be done. These were thoughts of my own not based on anything except a perception of what the position was likely to be. I raised these matters with counsel and, although counsel for the respondents had not expressed any wish to cross-examine Mr Alexander, counsel for AVCS offered to call him to allow me to take up the matters that concerned me with him. In the upshot a supplementary statement was obtained from Mr Alexander who attended the hearing in case there was any further matter about which I was concerned. In the result, the supplementary statement satisfied me about the matters that I had raised and I did not require him to give oral evidence.
Mr Alexander said that the sampling system described in his original statement was designed to take into account major sources of variation across different schools, systems, classifications and regions. He said that account was taken in the sample, in the correct proportion of primary and secondary schools, by State, by region, by size and systems: Government, Catholic or Independent. He said that there were obviously differences in copying levels and content across schools. He said, however, that the differences did not appear to be as great as might be imagined. Statistical tests of significance which AGB McNair had applied to the actual data provided by schools indicated few differences apart from those between the volume of copying between primary and secondary schools. He said that the differences “hold up over time”, by State, by region, by system and by size of school.
Mr Alexander also said that, while there might be differences in copying rates between a particular small country school and a particular large city school, this did not hold generally. Overall the rates of copying in city and country schools did not differ significantly. Nor did differences between large and smaller schools “reach significance”.
Mr Alexander concluded that the individual differences amongst schools that do exist are not significant apart from the exceptions to which he referred. He said that, on the basis of the reporting of copying provided by sampled schools under the current scheme, a single rate was the most reliable. The rate might only be broken into separate rates for primary and secondary schools but not for other classifications. He said that it was theoretically possible to measure rates for individual schools and even for individual students. But in terms of cost, time and burden, it would not be practical. He also said that, paradoxically, attempts further to stratify samples to provide more reliable estimates of copying rates for different educational institutions had produced less reliable results.
Mr Alexander’s evidence satisfies me that the sampling system which is used is appropriate. That appears to be the joint view of the parties.
Another matter about which I had some concern was the amount of reserves maintained by AVCS. There was some criticism of this by counsel for the respondents on the basis that the amount was unnecessarily high. From this there developed a submission that, if the reserves were too high, it would reflect a situation in which the amounts which were being received were more than were required for AVCS’s purposes. I have not gone to the detail of this evidence, but I am satisfied on the basis of evidence given by Ms Bridge that the amount of the reserves is not excessive in the circumstances bearing in mind the obligations both actual and contingent which AVCS has to its members.
That completes my account of what I consider to be the essential evidence in this matter. There is a great deal more evidence than that to which I have referred. I have not referred to a number of witnesses who gave evidence by statement and I have not referred to many of the annexures and exhibits which there are. This is not because I regard any of this other material as necessarily irrelevant or unhelpful. It is just that I think that the decision which needs to be made and the reasons for it, need to be kept in some sort of bounds. The matters which I have referred to are I think those which will guide me in the ultimate task which I have. I do not wish those whose evidence to which I have not referred to think that I have put their evidence aside without taking it into account. I have taken the evidence generally into account but I do not think that it is useful in a case of this kind to provide an overall review of the evidence unless that has a direct bearing on the matters which have to be decided. I consider that the evidence to which I have referred contains the essential matters which need to be taken into account in order to reach a conclusion.
Earlier in this judgment I referred to the approach which the Tribunal should adopt. If there were a going rate, I should apply it. In my opinion, there is not. Certainly I am satisfied that the university rates do not provide a going rate. Nor do the rates agreed upon by the AVCS and the schools in 1990. There is no relevant market or area of activity except that which involves copying of programs for educational purposes by schools, universities and TAFE colleges. The disparities in the rates paid by schools and those paid by universities and TAFE colleges are so great that they themselves deny the existence of any usual or going rate.
Is it then an appropriate case in which I should endeavour to construct a notional bargain between the parties? I do not think that course is appropriate here because I am not confident enough to construct the sort of hypothetical bargain that would need to be constructed if that course were followed. The exercise would have an undesirable artificiality about it which would make it not useful.
That leaves judicial estimation. Difficult and uncertain though that is, it is I think the only choice that I have. I must do my best, taking into account the whole of the evidence and the whole of the circumstances of the case, to reach a conclusion on what I consider to be equitable remuneration in all the circumstances. The exercise is a difficult one. It involves a large degree of uncertainty and it also involves the Tribunal selecting a figure not only with which not everyone would agree but which may be only one of several figures which could reasonably be arrived at in the circumstances.
The extremes in the case are the $1 or a little more which is contended for by the respondents and which was espoused by Mr Chapman in his evidence and, at the other end of the scale, the rates leading eventually to the sum of $7.82 per student for the 1998-99 year claimed by AVCS. That rate is now only a little over half of what was originally claimed. Both the amount claimed and the reduced claim made in counsel’s address are purportedly based upon the university rates but have been reduced in order to bring a degree of reality into the claim. Either the university rates are a guide or they are not. AVCS has departed so far from them in its final claim that it is very difficult to say that they have provided any guidance whatever to the rate which was selected other than the fact that they do suggest that the rates for schools ought to be substantially higher than they are at present.
Earlier I explained the difference between programs which are general and programs which are ephemeral and also the provisions of s.153A dealing with time shift. I do not pause to decide whether programs falling within this category are also properly categorised as ephemeral programs. I want to make it clear that I have taken into account the provisions of s.153A and also those of Regulation 25A of the Copyright Tribunal (Procedure) Regulations which I have earlier set out. Some of these provisions are not applicable in the present circumstances but to those which are relevant I have given due weight. I think that it is correct to say that each of the matters specified in Regulation 25A which is of direct relevance has been taken into account one way or the other in the discussion in which I have so far engaged.
Although there is the difference between ephemeral and general programs, I think it would be unwise to have a rate fixed which was not an overall rate. In other words the rate fixed ought to take account in a general way of the fact that a proportion of the programs will be taped and will have usefulness for a comparatively short time; others will remain indefinitely in a school’s video library. That is the approach which counsel for AVCS have adopted in their final submissions and I agree with it.
I reject submissions that were made to me in support of Mr Chapman’s evidence that AVCS should be bound indefinitely by the rate to which it agreed in 1990 so that the rate would go on as it was fixed in the agreement subject to increases in accordance with the Consumer Price Index. In Reference by Australasian Performing Right Association Limited; Re: Australian Broadcasting Corporation (1985) 5 IPR 449, the Tribunal said (at 478) that the parties to an ongoing relationship such as that in question in that case were not tied to a basis of remuneration earlier agreed upon for all time. There is a question whether AVCS was entitled to seek a review of the agreed rate. But the agreements into which the schools had entered entitled it to terminate them on 12 months notice which is what it did. The parties thus contemplated that the agreement might come to an end as early as 30 June 1994.
Obviously, it is relevant to consider whether, despite the termination, the rates should remain at the level which were agreed in the 1990 agreement. But I am satisfied on the evidence, particularly the evidence of Ms Bridge, that AVCS decided to agree upon the rates fixed in 1990 which ultimately led to the $1 per student because the whole idea of what was occurring was new. No one had any experience in the area. What AVCS decided was that, after four years experience, there should be a review to determine what really was an appropriate rate. The 1990 rates remain in the background as relevant factors. They are more relevant than the university rates because they represent an agreed rate between AVCS and the schools in relation to the very use which is in question in this case. It would be open to the Tribunal to do as Mr Chapman, and indeed counsel for AVCS, would wish it to do and hold AVCS to the 1990 rates. But having considered the whole of the material and what has been said by various witnesses including Mr Chapman but also Mr Collis-George, Ms Bridge and Mr Kyrios, I do not think that that result would be correct. I am of opinion that AVCS is entitled to have an increase in the rate which was originally agreed because, on the whole of the evidence, I consider $1 per student not to represent a fair payment for what the schools take. It would not be equitable remuneration. But the difficult question is to determine what the new rate should be.
I need to deal with two submissions made by counsel for the respondents, the first to the effect that it was not permissible for the Tribunal to provide for a phasing in scale in its determination and the second that it was not permissible to include a provision in a determination which would allow for increases depending on movements in the Consumer Price Index. I reject both these submissions. In my opinion the Tribunal, in reaching a conclusion upon what equitable remuneration should be, has a wide jurisdiction and a wide discretion. In cases where there is a substantial increase in rates or prices, it is not uncommon to phase in the increases over a period as the parties did in their 1990 agreement. This helps parties adjust to changes and to make provision for increased payments which have to be made. Similarly, it is common now in many types of agreement for there to be included escalation clauses which will enable rates which are paid to be kept in line with the real value of money. A common approach is to index rates to the Consumer Price Index. That is what is contended for by counsel for AVCS here. If it seems appropriate, therefore, the rates which I fix will include differential rates for the early years in order to allow phasing in and will also allow adjustment of the rate eventually fixed in accordance with the Consumer Price Index. If the Tribunal did not have jurisdiction in an appropriate case to give effect to submissions of this kind, its ability to fix equitable remuneration in the circumstances of a given case might be substantially restricted.
I come then to the ultimate question of what in all the circumstances the amount of equitable remuneration in this case should be. I have decided upon the following rates all based on students being actually or notionally full-time:
1994-95 $1.40 per student
1995-96 $1.80 “ “
1996-97 $2.20 “ “
1997-98 $2.60 “ “
Thereafter the rates should move in accordance with movements in the Consumer Price Index.
There are some matters which may need to be the subject of discussion when the case comes into the list for the making of orders. One of these is whether there is to be included any provision which will entitle one or other of the parties to come back to the Tribunal within the period of the determination to seek a variation because of changes in technology. This is a matter I discussed earlier in these reasons. There may be other matters upon which the Tribunal’s decision will be required. I have in mind some of the machinery provisions which were included in the 1990 agreement which may need to be the subject of further consideration. There was mention of this during the hearing but my impression was that such differences as there were between the parties about matters of this kind had been resolved. If I am incorrect about this, the matter can be raised when the orders are being considered. It would be as well if any matter of this kind has substance, for it to be notified to the other party and the Tribunal beforehand so that there will be notice of the matters which need to be considered.
Accordingly, the matter is stood over for a short time to enable the parties and their legal advisers to consider what the Tribunal has said. When it is again in the list, counsel are to bring in short minutes of order to give effect to the decision.
I certify that this and the preceding sixty-nine (69) pages are a true copy of the reasons for decision herein of the Copyright Tribunal.
Associate to the President
Dated
APPEARANCES
Counsel for the Applicant: Mr D.K. Catterns QC and
Mr R. Cobden
Solicitors for the Applicant: Sprusons
Counsel for the Respondents: Mr R.J. Ellicott QC and
Mr M.R. Ellicott
Solicitors for the Respondents:
Nos CT 45 - CT 62: Crown Solicitor for New South Wales
Nos CT 63 - CT 73: Minter Ellison
Dates of hearing: 7, 8, 9, 10, 13, 14, 15,
16 May 1996
Place of hearing: Sydney
Date of decision: 1 May 1997
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