Open Eye Pty Ltd v AUDIO-VISUAL Copyright Society Trading as Screenrights
[2020] FCCA 7
•4 March 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| OPEN EYE PTY LTD v AUDIO-VISUAL COPYRIGHT SOCIETY TRADING AS SCREENRIGHTS | [2020] FCCA 7 |
| Catchwords: COPYRIGHT – Application for summary dismissal – no reasonable prospect of success – application granted. |
| Legislation: Copyright Act 1968 (Cth), ss.98, 115, 132AC, 132AE, 134 |
| Cases cited: Audio Visual Copyright Society Ltd v Australian Record Industry Association Ltd and Others (1999) 152 FLR 142 |
| Applicant: | OPEN EYE PTY LTD |
| Respondent: | AUDIO-VISUAL COPYRIGHT SOCIETY TRADING AS SCREENRIGHTS |
| File Number: | SYG 751 of 2019 |
| Judgment of: | Judge Driver |
| Hearing date: | 5 December 2019 |
| Date of last submissions: | 17 December 2019 |
| Delivered at: | Sydney |
| Delivered on: | 4 March 2020 |
REPRESENTATION
| Mr O Scherl, with leave, for the Applicant |
| Counsel for the Respondent: | Mr R Potter |
| Solicitors for the Respondent: | McCabe Curwood |
ORDERS
Under s.17A of the Federal Circuit Court of Australia Act 1999 (Cth) and rule 13.10(a) of the Federal Circuit Court Rules 2001 (Cth), the application filed on 28 March 2019 is dismissed.
The applicant shall pay the respondent’s costs of the proceedings generally which, if not agreed, shall be assessed and, if necessary, taxed in accordance with the Federal Court Rules.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 751 of 2019
| OPEN EYE PTY LTD |
Applicant
And
| AUDIO-VISUAL COPYRIGHT SOCIETY TRADING AS SCREENRIGHTS |
Respondent
REASONS FOR JUDGMENT
Introduction and background
By interlocutory application filed on 17 May 2019, the respondent in the principal proceedings (Screenrights) seeks the summary dismissal of proceedings against it under rule 13.10 of the Federal Circuit Court Rules 2001 (Cth) (Federal Circuit Court Rules). Alternatively, Screenrights seeks that the application and statement of claim filed by the applicant in the principal proceedings (Open Eye) be struck out. Screenrights also seeks its costs.
The application is opposed by Open Eye in its response filed on 19 November 2019.
The summary dismissal application is supported by the affidavits by Emma Elizabeth Madison made on 29 May 2019 (first Madison affidavit) and 2 December 2019. I also received as an exhibit[1] a production agreement dated 15 April 1983 between a company called Cinevest Limited and Limelight Productions Pty Limited (and another).
[1] Exhibit R1
In its opposition to the summary dismissal application, Open Eye relies upon its Amended Statement of Claim (ASOC) and the affidavit of Oscar Scherl made on 22 October 2019.
Two volumes of documents were also exhibited to the first affidavit of Ms Madison.
The parties both filed written submissions for the purposes of the interlocutory hearing on 5 December 2019 and made oral submissions at that hearing.[2]
[2] the hearing was technically a rehearing because a hearing had earlier been conducted by another judge of this Court, who recused herself upon discovering a possible conflict of interest
In post hearing submissions, Open Eye makes wide ranging allegations concerning the conduct of Screenrights both in the performance of its functions and in the conduct of these proceedings. Those allegations extend to the conduct of the judge of the Court who dealt with the matter prior to her recusal. I have considered but to do not see any need to comment on those allegations in respect of this interlocutory judgment, other than to the extent detailed below.
The background to this matter is that Open Eye (through Mr Scherl) has been pursuing a claim of copyright in the Australian movie “Silver City” for decades. The other party to the copyright dispute is Limelight Productions, which is not a party to these proceedings. That is the essential problem. Screenrights is a collecting society. It collects copyright royalties and disburses them to copyright owners. It does not determine copyright rights, although it does attempt to resolve disputes for the purposes of making royalty payments. Screenrights has been involved over many years in dealing with issues of copyright ownership (and thus entitlements to receive royalties) as between Open Eye and Limelight. As a result of its enquiries and, on advice, for the most part royalties have been paid to Limelight.
Open Eye has brought these proceedings in an attempt to obtain a determination of copyright in its favour, and hence an entitlement to royalties and other damages. The difficulty is, however, that, despite being invited to do so, Open Eye has not joined Limelight as a respondent to its application. Limelight is, in my view, a necessary respondent. It is the other party to the longstanding copyright dispute and would be entitled to defend its position before a definitive determination of copyright ownership. Screenrights, on the other hand, has no interest in which entity owns the copyright in the film. If copyright proceedings were brought against Limelight and Screenrights, Screenrights would submit to any order of the Court save as to costs. What Screenrights objects to (and properly so) is being expected to deal with the copyright claim of Open Eye itself.
These matters are dealt with in detail of the submissions made on behalf of Screenrights. I agree with those submissions.
The Court may summarily dismiss a proceeding if it is satisfied that Open Eye has no reasonable prospect of successfully prosecuting the claims in the proceeding.[3]
[3] Federal Circuit Court of Australia Act 1999 (Cth), s.17A(2); Federal Circuit Court Rules, rule 13.10(a)
The principles relating to the application of the Federal Circuit Court Act s.17A and rule 13.10 of the Federal Circuit Court Rules are well-established and were recently summarised by Judge Obradovic in Ritter & Ritter & Anor[4] at [4]-[13] and Judge Lucev in Ellis v Wadjemup Trading (No.3)[5] at [6]-[11].
[4] [2019] FCCA 782
[5] [2018] FCCA 3075
As stated by Judge Obradovic in Ritter at [10](d)-(e):
(d)the exercise of power to summarily dismiss requires a practical judgment by the Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue;
(e) However, the inquiry required is whether there is a “reasonable” prospect of prosecuting the proceeding, not an enquiry directed to whether a certain and concluded determination could be made that the proceeding would necessarily fail.
A proceeding is liable to be summarily dismissed pursuant to rule 13.10(a) if the applicant fails to plead a cause of action, either at all or with any reasonable prospect of success.[6]
[6] e.g. Ellis at [34]
Strike out
The principles for striking out a pleading pursuant to rule 16.21(e) of the Federal Court Rules (applicable by reason of rule 1.05(3) of the Federal Circuit Court Rules and Schedule 3, Part 2, item 11) are also well-established and were summarised by Judge Lucev in Ellis at [37](a)-(d), and[38].
In this context, a “reasonable cause of action” means one with some chance of success if regard is had only to the allegations in the pleadings relied upon by the applicant.[7]
[7] Ellis at [38]
Factual background
Screenrights is a declared collecting society for various statutory royalty schemes under the Copyright Act 1968 (Cth) (Copyright Act).[8] It collects and distributes royalties to members under those schemes.[9]
[8] first Madison affidavit at [8]-[10]
[9] first Madison affidavit at [8]-[10]
Screenrights collects royalties and distributes them to copyright holders in the manner of a trustee. In Audio Visual Copyright Society Ltd v Australian Record Industry Association Ltd & Ors[10] at [32], Symos J said:
In my opinion, this provision in that definition, that the plaintiff has been authorised to collect equitable remuneration "on behalf" of the copyright owners, and to hold on trust and distribute the amounts collected to the relevant copyright owners, is a further indication that the equitable remuneration collected consists of amounts which are paid for and to which the copyright owners are entitled, and which are collected by the Society as agent for the copyright owners, which by reason of the fact that those moneys are the moneys of the copyright owners, and are held on trust, should be kept separate, this obligation being, as stated earlier, one of the important indicia of the creation of a trust.
[10] (1999) 152 FLR 142
Where two or more members of Screenrights submit a claim to the same royalties, this is known as a “competing claim”.[11]
[11] first Madison affidavit at [26]
Where there is a competing claim, Screenrights holds the disputed royalties on trust until a resolution is reached by the parties or, if resolution cannot be achieved, it uses alternative dispute resolution procedures, including internal or external determination to resolve the issues.[12]
[12] first Madison affidavit at [27]-[33], [49]-[62], [81]-[91], [92]-[97]
In 2002, Open Eye and Limelight had a competing claim for royalties in respect of Silver City.[13]
[13] first Madison affidavit at [53]
In April 2003, an independent expert, David Zimmerman, made an external determination, which concluded that the disputed royalties should be paid to Limelight.[14] Screenrights subsequently paid the disputed royalties to Limelight in accordance with the determination.[15]
[14] first Madison affidavit at [58]-[60]
[15] first Madison affidavit at [62]
In September 2016, Open Eye and Limelight had a competing claim for additional royalties in respect of Silver City.[16]
[16] first Madison affidavit at [69]
In May 2017, Screenrights made an internal determination, which concluded that disputed royalties should be paid to Limelight.[17] Open Eye subsequently made a request for an external determination.[18]
[17] first Madison affidavit at [90]
[18] first Madison affidavit at [90]-[91]
In October 2017, an independent expert, Angela Bowne SC, made an external determination, which concluded that the disputed royalties should be paid to Limelight.[19] Screenrights subsequently paid the disputed royalties to Limelight, in accordance with the determination.[20]
[19] first Madison affidavit at [94]
[20] first Madison affidavit at [96]
Open Eye subsequently made various demands, complaints and threats to Screenrights, its directors, officers and others.[21]
[21] first Madison affidavit at [98]
Open Eye’s copyright ownership claim against Screenrights
Open Eye claims to be the “exclusive” owner of the copyright in Silver City, by reason of s.98(3) of the Copyright Act and via assignment from Cinevest Limited (Cinevest).[22]
[22] see ASOC, page 2, page 18, Final Orders sought
Despite being invited to do so, Open Eye has declined to join the competing claimant for royalties, namely Limelight, as a respondent to these proceedings. Screenrights lays no claim to any rights and has no “position” in any copyright dispute between competing parties.
Screenrights has discharged its duty as a trustee in distributing royalties in an equitable manner and has abided by the findings of an independent expert (Ms Bowne SC) as to the holder of the relevant rights. There is no claim in these proceedings (nor could there seriously be one) that Screenrights has acted in breach of trust towards Open Eye as a potential beneficiary. At all times Screenrights has acted impartially and ultimately relied upon the determination of an external expert prior to making the distribution of royalties in 2017.[23]
[23] first Madison affidavit at [92]-[96]
In the absence of any maintainable cause of action against Screenrights and in the absence of joining the competing rightsholder Limelight to these proceedings, the proceedings should be summarily dismissed against Screenrights (the only current respondent to these proceedings).
Screenrights does not make any submissions in these proceedings as to whether or not Ms Bowne SC was correct or not in her determination as to the competing rights. Screenrights has discharged its responsibilities as a trustee by distributing royalties in accordance with its own rules. Subject to addressing below the further matters raised in the ASOC as against Screenrights, I accept Screenrights’ central submission that there is no reasonable cause of action pleaded against it in these proceedings.
Open Eye’s “illegal registration” claim
Open Eye claims that Screenrights illegally registered Limelight as a second (or in other words, a competing) owner of the copyright in Silver City.[24]
[24] ASOC, pages 3-5, sec 2
Screenrights does not register persons as copyright owners. Screenrights operates a registration system by which members may make claims for royalties collected by Screenrights.[25]
[25] first Madison affidavit at [14], [22]-[25]
Open Eye appears to submit that by paying the disputed royalties to Limelight, Screenrights has breached clauses 2.4, 2.5 and 3.1 of its membership agreement and article 2.2 of its Articles of Association.[26]
[26] ASOC, page 4, sec 2, (c)-(d); ASOC, pages 7-8, sec 5, paras (a)-(b)
As pleaded at page 8 of the ASOC, clause 2.4 of the membership agreement is a warranty given by Open Eye for membership, not Screenrights, that Open Eye is a “Relevant Copyright Owner” or “the Agent of a Relevant Copyright Owner”.[27]
[27] ASOC, page 4, sec 2, (c)
As pleaded at page 8 of the ASOC, clause 3.1 of the membership agreement provides that the Board may require an applicant for membership to submit details of the relevant copyrights to Screenrights, and the warranty given under clause 2.4 applies to each relevant copyright so notified. The clause says nothing about payment of royalties.
As pleaded at page 8 of the ASOC, clause 2.5 of the membership agreement provides that “…only one (1) but not both of the Relevant Copyright Owner of that Relevant Copyright, and the Agent of that Relevant Copyright Owner” is eligible for membership.[28] The clause does not apply to Open Eye and Limelight, who are not in a principal and agent relationship.
[28] ASOC, page 4, sec 2, (d)
The same submission applies to the alleged breach of article 2.2 of Screenrights’ Articles of Association.[29] Open Eye and Limelight are not in a principal and agent relationship.
[29] cf. ASOC, pages 4-5, sec 2, (e)
For these reasons, Open Eye’s claim that Screenrights had illegally registered Limelight as a second copyright owner has no reasonable prospect of success and should be summarily dismissed.
Open Eye’s claim based on the marketing/distribution agreement with Cinevest
Open Eye claims that it has an entitlement to receive royalties because of a marketing and distribution agreement with Cinevest.[30]
[30] ASOC, page 5, sec 3
It appears that, as between Cinevest and Limelight, Limelight owns 100 per cent of the legal title, and 96 per cent of the beneficial interest, in the copyright.
The relevant terms of the marketing and distribution agreement have not been pleaded. Open Eye has not alleged, for example, that under the agreement, Cinevest has appointed Open Eye as its agent to collect Screenrights royalties in respect of Cinevest’s 4 per cent beneficial interest in the copyright.
For these reasons, Open Eye’s claim that it is entitled to receive royalties because of a marketing and distribution agreement has no reasonable prospect of success and should be summarily dismissed.
Open Eye’s “conflict of interest” claims
Open Eye makes various conflict of interest allegations, that: a former Screenrights director or chair (Bridget Godwin) was an in-house lawyer at the Special Broadcasting Service (SBS); that SBS had broadcast Silver City; that SBS had obtained a licence from Limelight to do so; and that SBS had made a “without prejudice” offer to Open Eye.[31]
[31] ASOC, pages 5-7, sec 4, (i)-(vi)
These allegations cannot be established, for at least the following reasons:
a)first, two of the royalty determinations were made by independent experts, Mr Zimmerman and Ms Bowne SC;[32]
b)secondly, the independent experts were appointed by external dispute resolution organisations, LEADR[33] and the Resolution Institute;[34]
c)thirdly, Ms Godwin did not participate in Screenrights’ decision-making affecting competing claims.[35] In any event, Screenrights’ internal determination was upheld by an independent expert, Ms Bowne SC;[36] and
d)fourthly, Open Eye has not pleaded any allegation that Screenrights was somehow involved in SBS’s broadcast of Silver City.
[32] first Madison affidavit at [118(c)(iii)]-[118(c)(iv)]
[33] Lawyers Engaged in Alternative Dispute Resolution
[34] first Madison affidavit at [58], [92]
[35] first Madison affidavit at [118(c)(v)]
[36] first Madison affidavit at [90], [94]
For these reasons, Open Eye’s “conflict of interest” allegations have no reasonable prospect of success and should be summarily dismissed.
Open Eye’s copyright infringement claims
Open Eye further claims that Screenrights has infringed the copyright in Silver City pursuant to ss.115, 132AC and 132AE of the Copyright Act.[37]
[37] ASOC, pages 5-7, sec 4, (viii)
These allegations cannot be established for at least the following reasons:
a)first, Open Eye has not pleaded any allegation that Screenrights was somehow involved in SBS’s broadcast of Silver City;
b)secondly, the alleged broadcast of Silver City by the SBS was in 1999.[38] Any action for infringement of copyright against Screenrights would be statute‑barred by reason of s.134 of the Copyright Act.
[38] see ASOC, page 7, SBS fax letter date; page 14, 4th paragraph
For these reasons, Open Eye’s copyright infringement claims have no reasonable prospects of success and should be summarily dismissed.
Open Eye’s “undue influence” claims
Open Eye further claims that Screenrights exercised undue influence by failing to provide certain documents to the independent experts, Mr Zimmerman and Ms Bowne SC.[39]
[39] ASOC, pages 8-10, sec 5, (c)-(d)
The allegations cannot be established, for at least the following reasons:
a)first, for each determination, Open Eye was free to make (and did make) submissions, including by annexing and referring to documents such as Screenrights’ articles of association and membership agreement. In fact, the submissions of Open Eye’s then solicitor dated 19 January 2017 referred to those documents;[40]
b)secondly, contrary to the ASOC at page 9 (d), Ms Bowne SC did receive the submissions of Open Eye’s solicitor, and her decision recorded that she had considered them;[41]
c)thirdly, and contrary to page 9 (d), 2nd last sentence of the ASOC, the Court can take judicial notice that Ms Bowne SC has substantial expertise in copyright law, and Screenrights was not required to draw the terms of s.98(3) of the Copyright Act to her attention. In any event, s.98(3) did not apply (given the presence of an agreement existing to the contrary). The submissions of Open Eye’s then solicitor (who is also experienced in copyright law) did not refer to s.98(3).
[40] first Madison affidavit at [118(b)(i)]
[41] first Madison affidavit, exhibits tab 51-52 at [3(4)], [4]
For these reasons, Open Eye’s “undue influence” allegations have no reasonable prospect of success and should be summarily dismissed.
Other allegations
Open Eye claims that Screenrights interfered with or blocked certain correspondence to directors of Screenrights, based on the fact that Open Eye did not receive any response.[42]
[42] ASOC, pages 12-17, secs 6-7
Open Eye has not pleaded any legal obligation on the part of Screenrights to respond to Open Eye’s correspondence. In any event, Screenrights did respond to Open Eye’s correspondence on multiple occasions.[43]
[43] see first Madison affidavit at [101], [103], [105], [108], [111], [113], [117]
Open Eye further claims that Screenrights failed to report or disclose the dispute with Open Eye to the code reviewer.[44]
[44] ASOC, page 17, sec 8
Open Eye has not pleaded any legal obligation on the part of Screenrights to report or disclose the dispute (there is an open-ended reference to “Corporations Law Breach” in the ASOC at page 17, sec 8, but no specific contravention is pleaded). In any event, Screenrights did report informal complaints made by Open Eye to the Code Reviewer of the Code of Conduct for Collecting Societies.[45] The Code Reviewer did not make any adverse findings against Screenrights.[46]
[45] first Madison affidavit at [125]
[46] first Madison affidavit at [126]
For these reasons, Open Eye’s other allegations have no reasonable prospect of success and should be summarily dismissed.
Conclusion
I have concluded that the proceedings against Screenrights should be summarily dismissed under s.17A of the Federal Circuit Court of Australia Act 1999 (Cth) and rule 13.10(a) of the Federal Circuit Court Rules. I will so order.
Screenrights seeks an order for costs on the basis that costs follow the event. I agree. The recoverable costs are those of the proceedings generally, including the interlocutory application for summary dismissal. I will make a general costs order to that effect.
I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 4 March 2020
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