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Legal action

In some cases legal action may be possible. Although, as explained earlier, UK law largely recognizes freedom of contract, legal action may assist authors in certain limited situations by resorting to a number of doctrines.

First, some contractual arrangements may valuably be subjected to legal interpretation. This may be particularly productive in relation to dissemination through new technologies. For example, a contract may confer the “reproduction right” on the transferee, and the transferee may later claim this justifies reproduction by way of technologies not envisaged at the time of the contract. For example, a contract signed in 1919, by which the author Sir James Barrie granted Famous Players Film Co “the sole and exclusive licence to produce [Peter Pan] in cinematograph or moving picture films”, was held not to cover the making of cinematographic films which had sound-tracks (“talkies”): the technology was not available until 1923 or commercially usable until 1927 and the parties were held to have envisaged merely a short-term relationship.[1]

While there is no special canon of construction of copyright contracts under UK law which requires that the contract be interpreted in favour of the author, a conclusion in favour of a creator’s interest might sometimes follow from application of normal principles of contractual interpretation. According to UK law, contracts are to be interpreted in the same way as any serious utterance would be interpreted in ordinary life: by ascertaining the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably be available to the parties in the situation in which they were at the time of the contract.[2] The language of the document is understood against the background, and while that background will usually require the words be understood as bearing their ordinary meaning, the background may be such as to require that words be read in a different way or even ignored. In addition, occasionally in cases of real ambiguity, the English and Welsh courts apply the so-called contra proferentem rule. The basis of this rule “is that a person who puts forward the wording of a proposed agreement may be assumed to have looked after his own interests, so that if the words leave room for doubt about whether he is intended to have a particular benefit, there is reason to suppose that he is not.”[3] In a recent case,[4] Mr Justice Neuberger observed that although the rule 

“is often pretty weak, it is of some force when it is part of the overall picture. That is particularly so in the case [where one party] is a large organization with a knowledge of the market and financial ability to employ and obtain the best legal and other advice, whereas [the other party] will almost always be a small individual with very limited funds and knowledge.”

This rule may then assist an author in arguing for a restrictive interpretation of a contract with an exploiter. However, its limitations should also be noted: it only applies where conventional rules of interpretation give rise to ambiguity – that is where the document is open to more than one interpretation.[5]

Occasionally, it may be possible for a creator to utilize the second legal avenue and to argue that the copyright contract is invalid. Although UK law enforces contracts freely entered there are a few doctrines which allow courts to set aside contracts in certain specific circumstances. These have occasionally availed creators, particularly in the music industry. First, contracts lasting for over five years according to which a creator agrees to assign all his or her existing and future creations exclusively to the exploiter, may be treated as unenforceable contracts in restraint of trade.[6][7] Similarly, contracts entered by young and vulnerable creators, without independent legal advice, may be held voidable on grounds of undue influence. Third, and a more promising avenue for some creators, is that it may be possible to claim that contracts have been made in circumstances of economic duress.

As mentioned above, one common tactic employed by exploiters is to force assignments of rights after a work has been created and supplied (the signing of the assignment operating as a condition for being paid). Although it will always be a matter of construction, if (i) the original agreement had been merely one of supply of work in return for payment and (ii) the exploiter is in effect demanding the assignment of rights as an additional condition by threatening not to pay in accordance with the terms of the initial agreement and (iii) the effect of the threat is to induce the assignment, a court may find there has been an exercise of economic duress and/or lack of consideration for the contractual variation,[8] such that the creator may be able to get the transfer set aside.[9]

A third possible legal strategy, which might assist creators, is the use of competition law. This is the branch of the law aimed at preventing cartels, anti-competitive agreements, and unfair use of market power. Competition law operates at both European and national level, with the substance of national law under the Competition Act 1998 now paralleling that of the European Community.

Article 81 of the EC Treaty prohibits ‘all agreements between undertakings ... and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition.’ Article 81 goes on to outline certain practices, such as price fixing and market sharing, which will normally be prohibited. Section 2 of the 1998 Competition Act introduced a national provision equivalent to Article 81,[10] though there is no requirement of ‘effect on trade between Member States.’ Article 82 EC prohibits an undertaking from abusing a dominant position. In some situations, it might be possible to argue that contractual arrangements between creators and exploiters are agreements restrictive of competition or result from the abuse of a dominant position. For example, if a commissioner of music for films requires the composer to assign publishing rights to a third party, it might be arguable that the effect or intent was to reduce competition, or even that the imposition of such term was suggestive of an abuse of dominant position in one market (broadcasting) to restrict competition in another (the market for publishing rights).[11]

One problem with any such argument is lack of access to agreements between the commissioner and publisher (in whose favour the commissioner’s market power is being exercised). However, the Office of Fair Trading has wide powers to investigate complaints.[12]

Although litigation or other legal action will occasionally be a useful avenue for reform of contracts under existing UK law, it should be clear from what has been said that the scope for successful litigation is very limited indeed. When the cost and the potential repercussions for individual creators are added to the existing limitations, (especially when compared with the likely fruits of litigation to the individual) it is not surprising that there are few examples of such an approach being taken. In the absence of a change in the substantive legal framework, creators will have to look to other strategies for protection. Perhaps the best way is to try and prevent creators from entering such onerous and one-sided agreements in the first place.

[1] Hospital for Sick Children v Walt Disney Productions Inc [1966] 1 WLR 1055 (Buckley J) [1968] 1 Ch 52 (though Harman LJ, at 74, took a different view, Lord Denning MR and Buckley J took an approach more consistent with principles of interpretation established in Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896); Cf Serra v Famous Lasky Film Services Ltd Barstow v Terry [1924]  2 Ch 316 (Eve J.) (agreement in 1903 giving “entire rights” in play gave transferee the right to make cinematographic version conferred by 1911 Copyright Act). (1922) 127 Law Times 109 agreement in 1880 to transfer “exclusive right of production” of plays held to include cinematograph right even though the cinematograph was unknown even as a possible means of production to the parties;

[2] Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896, 912 (Lord Hoffmann) (HL).

[3] Tam v Bank of Credit and Commerce Hong Kong Ltd (in lquidation) [1996] 2 Butterworths Company Law Cases 69, 77 (per Lord Mustill).

[4] Re Drake Insurance [2001] Lloyd’s Rep I.R. 643.

[5] R v Personal Investment Authority Ombudsman Bureau Ltd (27 July 27 2000) per Langley J (“a last resort in a case of real ambiguity where two reasonable meaning are equally open”).

[6] See L. Bently & B. Sherman, Intellectual Property Law (Oxford: OUP, 2001) 275-8.

[7] R. Brownsword, ‘Copyright Assignment, Fair Dealing and Unconscionable Contracts’ [1998] Intellectual Property Quarterly 311 (considering potential of doctrine in the light of recent case law).

[8] Atlas Express Ltd v Kafco  (Importers and Distributors) Ltd [1989] QB 833 (Tucker J.) (economic duress from refusal to carry out delivery contract). The threat must be illegitimate: CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714, so the creator probably must show that the refusal to pay would amount to a breach of contract. The threat must also leave the creator with no practical choice but to assign. Refusing to assign and going to court to get paid may well not be a practical choice available to a creator. See further, Carillion Construction Ltd v Felix (UK) Ltd (6 November 2000).

[9] Dimskal Shipping Co SA v International Transport Workers Federation (The Evia Luck) No 2 [1992] AC 152 (economic duress can result in restitutionary remedy).

[10] Competition Act 1998, s 2.

[11] Out of the Box para 6.2.40 (“Where any of the talent groups … have cause for concern about abuse of market power in negotiations, systematic evidence should be presented to the appropriate competition authorities.”)

[12] Competition Act 1998, ss 25-29. R. Whish, Competition Law (London: Butterworths, 2001) ch.10.

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