Brodies TechBlog

Followers of my Twitter account will know that I tweeted last week: “Wayne Rooney has paid £5k to get his image rights back.  I would have advised Shrek to hold out for £10k”.    I was joking about Wayne’s appearance, but also referring to his dispute with Proactive Sports Management Limited.

The dispute
When Wayne Rooney was 17 he entered into an Image Rights Representation Agreement (“IRRA”) with Proactive, under which Proactive would negotiate contracts with third parties for exploitation of his image rights.  Proactive would take 20% of the gross sums payable on any contracts agreed, and the agreement was to run from 16 January 2003 to 16 January 2011.  All was well until October 2008, when Wayne and Proactive fell out.  The IRRA was subsequently terminated, and since then Proactive have been claiming that it is owed millions in damages and further millions in future commission.

The parties ended up in court, and on 1st December the Court of Appeal broadly upheld the earlier Manchester Mercantile Court decision that the IRRA was unenforceable on ground of restraint of trade.  Proactive will receive a payment for the reasonable value of its services, which will be established at a later hearing, but it won’t be calculated according to the contractual commission rate of 20%. (In case you’re wondering, the £5k in my joke above was how the tabloids reported it, but in typical tabloid-disinformation style actually refers to an accountancy bill which was adjudged to have been owed by Rooney to Proactive as the result of a totally separate agreement.)

In reaching their decision the judges found several aspects of the deal between Proactive and Rooney persuasive, including:

• Wayne was only 17 years old when the IRRA was signed;
• Wayne and his parents were “wholly unsophisticated in legal and commercial matters”, but were not advised to take legal advice;
• The IRRA was not in any sense a standard form – on the contrary, it was unusual in many respects; and
• The duration of the IRRA was excessive (notwithstanding Proactive’s submissions that it needed to “adopt a long terms strategy to develop the value of the player’s brand”).

What are “Image Rights”?
A good result for Wayne then.  But what are “Image Rights”?  “Image Rights” in the context of footballers refer to the rights in the likeness, name and other personal attributes of that individual, exploited through various off-field activities such as sponsorship, promotional appearances and shirt sales.  Legally, the UK has no actual codified law of image rights, so an individual wishing to protect these rights has to rely on a mix of privacy case law, and assorted legislation regarding data protection, copyright and trade marks.

At a World IP Day conference in Edinburgh a few years ago, I asked Patrick Stewart (Head of Legal at Manchester United) about image rights.  Patrick said it was the one thing he had hoped he wouldn’t be asked about!  At the time I was just genuinely interested to hear how they operated, and how they could be enforced – but with hindsight I was potentially putting Patrick on the spot about a pretty sensitive issue.

Image rights contracts in football
Football clubs increasingly use the concept of image rights as a way of offering paying star players suitable remuneration.  Payments for image rights allow players to avoid paying 50% income tax on all their earnings, whilst also saving the club from having to make National Insurance or PAYE contributons.

Here’s how it works.  Players are paid wages for their services on the pitch, but further image rights payments are made to a company which has been set up to hold the player’s image rights.  These payments are subject to corporation tax levied at 22%, and the players can take interest-free loans from the companies as a “benefit in kind” taxable at 2% (instead of salaries and/or dividends which would be income, and be taxable at the corresponding higher rate). 

Unsurprisingly these tax arrangements attract a lot of negative publicity.  In August the Press Complaints Commmission rejected a complaint made by Wayne Rooney about a Sunday Times article investigating the structuring of his finances.  Arsenal striker Dennis Bergkamp won a test case against the Inland Revenue in 2000 after it attempted to claim that a percentage of the image rights income that had been paid into an offshore business established in his name constituted tax evasion.  Nevertheless, HMRC has recently announced a new crackdown on tax evasion in football, so it looks like things will “kick off” (ah a football-pun in stoppage time!) again in 2012.

[Ed: the Techblogggers will now be negotiating image rights deals at their next appraisals.]

The European Court of Justice (“ECJ”) gave a preliminary ruling yesterday which may have wide–ranging consequences for the licensing and broadcast of copyright material across Europe.

What’s it about?
The ruling actually relates to two cases in which the UK High Court stayed proceedings in order to refer questions to the ECJ about the correct interpretation of law. The questions broadly concern the use of foreign decoder cards by UK pubs to screen English Premier League Football matches. “Football Association Premier League v QC Leisure and Others” concerns the legality of importing foreign decoders, while “Karen Murphy v Media Protection Services” concerns the eponymous Karen Murphy using a Greek decoder in her Portsmouth pub, because subscribing to a Greek broadcaster is cheaper than subscribing to the UK rights-holder Sky.

The Football Association Premier League (“FAPL”) is objecting to the use of foreign decoders and subscription to non-UK broadcasters because it grants its licensees the exclusive right to broadcast matches of the Premier League and exploit them economically within their respective broadcasting areas – generally the country in question. In order to safeguard this exclusivity, each licensee is required to encrypt its satellite signal and to transmit it in encrypted form to subscribers within its assigned territory. The program is decrypted with a decoder card.

The applicable law here is not straightforward. The kind of questions referred to the ECJ included whether decoders were “illicit devices” under the Conditional Access Directive, whether a football match could be classified as a copyright work under the Copyright Directive, and whether the FAPL’s exclusive licences were restricting competition.

What did the court say?
The answers to the above were “no” (because foreign decoders don’t permit free access to protected services), “no” (sorry Lionel Messi, but the ECJ believes that “football is subject to the rules of the game, leaving no room for creative freedom for the purposes of copyright”) and “yes” (“agreements which are aimed at partitioning national markets according to national borders or make the inter-penetration of national markets more difficult must be regarded, in principle, as agreements whose object is to restrict competition”).

Overall the ECJ reckoned that “such partitioning and such an artificial price difference to which it gives rise are irreconcilable with the fundamental aim of the Treaty, which is completion of the internal market.”  Where this leaves the concept of territorial licensing for any kind of copyright material is unclear. We may be seeing the first step towards pan-European licensing for sports, film and music, with consortiums of broadcasters bidding for rights.

What does this mean for the FAPL and the letting of broadcast rights?
The consolation goal for the FAPL is that the ECJ acknowledged it can assert copyright in things such as the opening video sequence, the Premier League anthem, various graphics and so on. This means that, in theory, pub landlords like Karen Murphy may still need to get permission of the FAPL to show these elements. This could lead to the FAPL devising a strategy to have as much copyright-filled material during the games as possible, in order to stop pubs from still subscribing to foreign broadcasters and just showing the matches.

However, even if the matches are filled with FAPL copyright material, surely such material would still be incidental to the match being broadcast, falling within the exemption in section 31(1) of the Copyright, Designs and Patents Act 1988: “Copyright in a work is not infringed by its incidental inclusion in an artistic work, sound recording, film or broadcast”?  There’s a suggestion that the FAPL may even resort to having its’ logo flit randomly about the screen, like a menacing and unpredictable “False 9”! It will be fun to see “what happens next”!

PS apologies for reporting this a whole day after the ruling, but I needed to find time to actually read the thing and work out what it meant. I suppose I could have written something broad in advance, with made-up quotes, but I’ll leave that to the Daily Mail.

The European Union’s Term of Protection Directive has been ratified, extending the term of copyright protection in the EU for sound recordings and performers’ rights from 50 years to 70. The directive is expected to be implemented by EU member states by 2014.

Copyrights in sound recordings currently run for 50 years from the year of recording, or 50 years from date of release if released outwith that year, and usually lie with the “producer” who has made the arrangements for the recording – typically the record company. Performers’ rights in sound recordings entitles them to contractual royalties on the sale and other exploitation of the recordings, and statutory remuneration from the copyright owner each time their work is played in public (though in practice most performers have relatively complicated contractual relationships, requiring their royalties from exploitation of recordings to be paid to their record company).

This traditional 50-year term of protection for sound recordings and performers’ rights was based on the principle that authors, such as music composers, should be entitled to a longer term of protection for their works (the life of the author plus 70 years) because their rights are linked to their personality and creative contribution, whereas the sound recording and performers’ rights typically arise from economic investment, and are usually owned by corporate bodies (the record companies).

The result of the 50-year term was that record companies became increasingly agitated during the noughties, as digital piracy led to plummeting revenue from record sales, whilst, simultaneously, valuable copyrights in classic 1960s recordings edged towards expiry.

The 2004 European Commission Staff Working Paper, the UK’s Gowers Review of 2006, and the European Community-commissioned IVIR Report of 2006 all considered the question of an extension, reaching the same conclusion: that it was undesirable on both economic and theoretical grounds, and that the extension would benefit record companies far more than the performers. For example, if the extension was solely to benefit performers during their lifetime, then why was an extension of up to 95 years being proposed? Why also were performers’ rights not an unalienable right of the performer? And why did the extension have to apply to the sound recordings at all? This year’s UK Hargreaves Report (which we blogged about in May) also noted scepticism about claims that the extension would spur creativity, noting drily that “no one has yet discovered a mechanism for incentivising the deceased”.

In recent years however this evidence-based approach to the debate, founded on economic reasoning, has been obscured by increasingly desperate and emotive arguments. Lobbyists representing record companies have sought to supplant the rather unappealing spectacle of big business protecting lucrative assets with an image which has been calculated to attract greater public sympathy: the beloved yet unrewarded music performer.

A major participant in the campaign for extension has been Sir Cliff Richard, whose performer’s rights in his string of breakthrough hits had either expired or were very close to doing so. The participation of artists such as Sir Cliff has clouded the issues. The Gowers Review noted that even in the most favourable scenario of additional revenue, the performing artists would receive only 1 percent or less of it, and in a highly uneven distribution favouring very few already very successful musicians. If the goal of the proposed reform was genuinely about helping a large number of artists, noted Gowers, then overhauling the relevant contract law would be much more effective.

It seems curious that someone as wealthy as Cliff Richard would bother to get involved with this issue. Of course, over the last decade he has become obsessed with getting a final No. 1 record, a quest which reached its’ nadir with the horrendous 21st Century Christmas. Should we expect a single sometime in the near future from a trendy chart-topping young buck like Tinie Tempah or Pixie Lott, prominently featuring a sample from a Cliff performance? If so, “Congratulations” would be the obvious candidate!