Court of Appeal ruling is music to Pink Floyd's ears



Members of the Court of Appeal model the stylish headwear
which replaces those musty old-fashioned wigs (artwork credit here)

If you have ever thought that some of the lyrics of Pink Floyd songs are hard to construe, you should try making sense of the lyrics of some of their contracts. This morning in Pink Floyd Music Ltd & Anor v EMI Records Ltd [2010] EWCA Civ 1429 the Court of Appeal for England and Wales affirmed a decision earlier this year of the Chancellor of the High Court, Sir Andrew Morritt, on the interpretation of the licensing agreement between Pink Floyd Music (PFM) and recording company EMI, noted here on the 1709 Blog.  The dispute focused on, among other things, the group's right to control the use of its oeuvre as ringtones for telephones.  The dispute arose over the interpretation of the terms of a 1999 agreement which incorporated the terms of an early master licence agreement (MLA) and the trial judge granted the band declarations that the contract did not entitle EMI to exploit recordings of five named albums and two singles by online distribution or by any other means other than the complete original recordings without PFM's consent.
The first declaration sought by the group was in these terms:

"Upon the true construction of [the 1999 Agreement] and/or the MLA, internet music providers (such as, for example, iTunes) are 'sub-licensees affiliates or any third party obtaining rights in this respect directly or indirectly from [EMI]' within the meaning of Clause 9(d)(i) of [the 1999 Agreement] or clause 6.1(b)(i) of the MLA, so that [EMI] is obliged to account to [PFM] in respect of income received at source by such providers."

The second was:

"Upon the true construction of the MLA, Clause 4.13 of the MLA applies to Online Distribution, so that the Defendant is not entitled to exploit the recordings on the MLA Albums (or other Albums now subject to the terms of the MLA) by Online Distribution or by any other means other than the original Album configurations, without the prior written consent of the Claimants which may be absolutely withheld (including by means of ringtunes and streaming)."

Today the Court of Appeal unanimously agreed with the Chancellor that PFM was entitled to the first declaration, but split 2-1 (Lord Neuberger MR and Laws LJ, against Carnwath LJ) in affirming the grant of the second one.  For the majority, Lord Neuberger MR explained that

"The question which divides the parties is whether clause 4.13, with its reference to "Records" and "Albums", extends to digital recordings",

observing that the parties themselves did not appear to adhere rigidly to the definitions they had stipulated.  His conclusion was influenced by that dangerous commodity, common sense:

" Commercial common sense strongly supports the case advanced by PFM, as the Chancellor said. It seems perverse to imagine that the parties envisaged the integrity of the Albums being rigidly controlled by PFM so far as they were physically recorded and distributed, but that PFM would have no control whatever over the integrity of digital recordings and distribution, particularly when one bears in mind that downloading by the eventual purchaser can involve a permanent recording being held on a physical format. While it is true that digital distribution was in its infancy at the time, it was plainly in existence and was seen by the parties as being commercially significant, and, on the issue of maintaining the integrity of recordings, no sensible reason for distinguishing between physical format and digital recordings has been advanced".

Concurring, Laws LJ added:

"... the question which divides the parties is whether clause 4.13 of the MLA extends to digital recordings. To my mind the starting-point here is the Chancellor's acceptance of the proposition that the purpose of clause 4.13 was to preserve the integrity of the albums. I agree with this .... Once that is accepted, it seems to me impossible to suppose that the parties in concluding paragraph 4.13 might have chosen to give effect to this purpose as regards physical products but not as regards digital products. I cannot see that any appeal to the relative infancy of digital recording in 1999 materially affects that conclusion. That was the purpose of the clause.


May the clause's language properly be read as giving effect to that purpose in light of the modern jurisprudence on the construction of contracts? ... in my judgment, the critical factor is that the language of the contract is equivocal. ...
I therefore see the case as one where the purpose of the provision is clear but the language is equivocal. In those circumstances, on established principles we should construe the contract so as to give effect to its demonstrated purpose ..."

Carnwath LJ was having none of this:

"... Important points to my mind are the prima facie assumption that the words mean what they say; the dangers of "detailed semantic and syntactical analysis" of a commercial document; and the warning against too readily inferring that something has gone wrong, merely because it appears to result in a "bad bargain", unless it produces a result which is "arbitrary or irrational". These points are particularly relevant in the context of a commercial contract drawn up and agreed by parties well able to look after themselves, and armed with the legal advice necessary to do so.

... We can of course infer, as did the Chancellor, that the general purpose was to preserve the artistic integrity of the album, at the same time as giving them ... "a platform for extracting more money". That simply explains the logic from PFM's point of view. It tells one nothing about EMI's willingness to concede the point, or how far they would have been willing to go if pressed. Given the uncertainty at that time about the future development and form of on-line distribution, it cannot necessarily be assumed that "uncoupling" would have been seen as having the same commercial immediacy or importance in that context. All we can go on is the natural meaning of what they agreed. ..."

The IPKat, as a born literalist, sympathises with Carnwath LJ but , as a born conformist, he is nonetheless inclined to agree in this instance with the conclusion of the majority. Whichever way the contract is construed makes bad news for one party or other and a plausible case can be made on each side.  Given the equivocal nature of the language, he agrees that the purposive approach is a good "tie-breaker".  Merpel says, what I'd like to know is whether clause 4.13 -- or something to like effect -- has been floating around in other bands' contracts too.  This could have repercussions.
 
Lyrics of "Several Species of Small Furry Animals Gathered Together in a Cave and Grooving With a Pict" (Ummagumma) here.

Footnote for privacy/publicity people: this case was originally listed as P v E, apparently because of the alleged commercial sensitivity of a percentage figure in one of the clauses of the 1999 Agreement. Lord Neuberger, concurring with the IPKat and Merpel on this issue, was critical of the unnecessary camouflaging of case names. He said:

"... the present appeal provides a good opportunity for this court to make it clear that a private hearing or party anonymisation will be granted in the Court of Appeal only if, and only to the extent that, a member of the Court is satisfied that it is necessary for the proper administration of justice.


The fact that the first instance judge granted or refused to permit a private hearing or anonymisation cannot be conclusive of such issues in the Court of Appeal ... A first instance judge's decision on such an issue self-evidently does not bind the Court of Appeal, and cannot determine how an appeal in this court proceeds. However, this court would normally pay close regard to the judge's decision, especially if expressed in a reasoned judgment. Nonetheless, in relation to appeals, the Court of Appeal should not depart from the general rule that litigation is to be conducted in public, unless a judge of that court is persuaded that there are cogent grounds for doing so ".