Pink Floyd Music Ltd & Anor v EMI Records Ltd

Contractual language is construed objectively, by asking what a reasonable person with the relevant background knowledge would understand the parties to mean. A recognised industry usage does not automatically control where the contract supplies its own wording or where the contractual context points elsewhere. Clear words cannot be displaced by a factual matrix or by implying a contrary term. For summary judgment, the question is whether the opposing party has a real prospect of successfully defending the claim. A contractual restriction intended to preserve the artistic integrity of albums may apply to digital exploitation where the agreement treats online distribution, so far as possible, like physical exploitation and contains no contrary limitation.

The claimants sought summary judgment on declarations concerning the construction of royalty and exploitation provisions in agreements with the defendant. The first declaration concerned whether receipts from online music providers formed part of the royalty pool calculated at source. The second concerned whether a prohibition on selling recordings other than in album form applied to single-track downloads, ringtones and streaming. The court considered the contractual wording, the surrounding circumstances, industry evidence and the summary judgment test under CPR 24.2(a)(ii).

1. Summary judgment test. Under CPR 24.2(a)(ii), the relevant question was whether EMI had a real prospect of successfully defending the declarations. The court applied the approach explained in Doncaster Pharmaceuticals Group Limited v Bolton Pharmaceutical Company 100 Limited [2007] FSR 3 and ICI Chemicals & Polymers Limited v TTE Training Limited [2007] EWCA Civ 725.
2. Royalty calculation. The phrase “at source” had to be construed in its contractual context. Although it could have an industry meaning, the words following it supplied the parties’ own definition. Those words were sufficiently clear to include receipts of licensees, sub-licensees, affiliates and other third parties obtaining rights directly or indirectly from EMI. The agreement contemplated online distribution, including direct transmission to consumers, and referred to all online sales. EMI’s proposed limitation to exclusive territorial licensees, excluding retailers, could not be derived from the agreement. The factual matrix could not displace the clear wording, and no contrary term could be implied. EMI therefore had no real prospect of defending the first declaration.
3. Album integrity restriction. Clause 4.13 of the MLA was intended to preserve the artistic integrity of the albums. Clause 6.1(b)(i) indicated that online distribution should, so far as possible, be treated like exploitation of physical product. The definitions of “Album” and “Record” did not confine them to physical products, while the definition of “Single” expressly included equivalent means of exploitation. The prohibition on selling recordings as singles therefore applied to online exploitation, including downloads, ringtones and streaming.
4. Summary judgment was granted and both declarations were made.