Sony/ATV Music Publishing LLC & Anor v WPMC Ltd & Anor

A negotiation marked subject to contract does not ordinarily create a binding contract or a proprietary estoppel, particularly where approval of the final work remains discretionary. Fair use under section 107 of the US Copyright Act is a flexible, fact-sensitive inquiry. A defendant need show that the amount copied is reasonable in relation to the transformative purpose; it need not establish that the minimum possible amount was taken. Nevertheless, copying entire expressive musical works, presenting their performances for entertainment, and using them in a commercially exploitable audiovisual package may be excessive and likely to harm both recording and synchronisation markets. The statutory factors must be assessed together, with the defendant bearing the burden of establishing fair use.

The claimants owned or controlled copyright in eight songs performed during a 1964 Beatles concert. The defendants produced a documentary incorporating almost the whole concert video, including complete performances of each song, and sought to exploit it in the United Kingdom and the United States.

The defendants argued that the negotiations had produced a collateral contract requiring the claimants to grant a synchronisation licence, or alternatively that the claimants were estopped from denying such an entitlement. They also contended that US exploitation constituted fair use under section 107 of the US Copyright Act. The issues were whether a contract or estoppel arose and whether the proposed use of the songs infringed the US copyrights.

1. Contract. No binding synchronisation agreement was concluded. The email said to constitute the offer was not accepted because the defendants sought to alter the requirement that approval of the finished film would not be unreasonably withheld or delayed. In any event, the communications repeatedly stated that they were subject to contract or signed contract. Objectively, the claimants did not intend to be bound until a signed agreement existed. Although the final film had been approved in substance, later conduct did not waive the subject-to-contract requirement. The parties were still proceeding towards execution of a formal licence, and neither had performed the putative contract.

2. Proprietary estoppel. The representations could not found an estoppel. Where negotiations are expressly subject to contract, the expectation of acquiring the relevant right remains contingent on a formal agreement. The defendants chose to produce the documentary before obtaining an executed licence and therefore assumed the risk that the claimants would refuse to conclude one. It was not unconscionable for the claimants to deny that a licence existed.

3. Fair use. Section 107 requires a contextual assessment of four factors: the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality taken, and the effect on the potential market or value of the work. Transformative use is important, but commercial use is not automatically fatal. The amount taken must be reasonable, rather than necessarily the minimum necessary, and copying an entire work can be fair where justified by the transformative purpose.

4. Applied here, the documentary was only partly transformative. It provided historical and cultural context, but presented complete performances for their intrinsic entertainment value. The songs were highly expressive works within the core of copyright protection. The copying was excessive because the documentary incorporated almost the entire concert video and made substantial additional use of the songs. The defendants produced no factual or market evidence to discharge their burden. The use was likely to damage markets for audiovisual recordings of live performances and for synchronisation licences.

5. The claimants therefore succeeded in their claims for infringement or threatened infringement of the UK and US copyrights.