Burn it up

The High Court’s ignorance of popular culture was highlighted again by Confetti Records v Warner Music. Stephen Gare and David Harmsworth warn of the potential pitfalls in record deals

‘Court says rap is a foreign language!’ screamed the headlines – making Mr Justice Lewison look like a judge in need of a jukebox jury. His conclusion that, as with truly foreign languages, only expert evidence would be admissible to assess the meaning of rap phrases such as “mish mish man” and “shizzle my nizzle” is an interesting point in itself. However, there is more to the case than the headline suggests. The judgment may not reveal satanic messages if read backwards, but two important warnings do emerge on a full reading: a deal memo may not be as binding as you think; and it is difficult for authors to enforce their moral rights in the UK.

Licensed to ill
Confetti Records owns the rights to Burnin, a UK garage track written by another of the claimants Andrew Alcee. Warner Music UK approached Confetti for a licence to use Burnin on Crisp Biscuit, a compilation album by another UK garage act, Heartless Crew. Confetti was enthusiastic, hoping to enhance the track’s exposure for its release as a single. Warner, therefore, faxed a standard form deal memo to Confetti, proposing various licensing terms and marked “subject to contract”. Confetti returned a countersigned copy to Warner and a few days later followed this up with the label copy for Burnin, plus the track on CD and an invoice for the licence fee. The invoice referred to the track as “Licensed”.
Shortly after, Confetti wrote to Warner threatening to “revoke” the licence if the fee was not paid. The letter was never received, despite being sent by recorded delivery and later faxed. Two months later, Confetti emailed Warner, referring to its earlier letter and repeating that either the track should be pulled from the compilation or a new licence negotiated. By this time, some 30,000 copies of the compilation album had been manufactured and Warner sought to rely on the countersigned deal memo. Confetti sued for copyright infringement.
Warner’s defence was that the deal memo was a binding contract licensing it to use Burnin on the compilation – or that, alternatively, the supply of the label copy, CD and invoice by Confetti was an offer of a licence that Warner had accepted by making use of the track, again creating a binding contract. Warner further contended that Confetti’s conduct amounted to a representation that a licence had been granted, on which Warner had relied to its detriment – and so Confetti was estopped from denying that the licence existed.
The judge held that it was long established that the phrase ‘subject to contract’ generally precluded any document on which it appeared from constituting a binding contract. Warner, however, argued that this settled meaning should be displaced here because there had been insufficient time to negotiate a long form agreement before starting to manufacture Crisp Biscuit, and if the deal memo was not binding then Warner would have borne an unfavourable commercial risk. The judge rejected this argument, noting that ‘subject to contract’ could simply have been omitted from the deal memo to achieve the desired effect.
Nor, the judge concluded, did ‘subject to contract’ have a special meaning within the music industry. Warner claimed that, in the music licensing context, the phrase indicated that a long form agreement would ultimately follow, but ensured that the deal memo terms would be binding until superseded. The judge dismissed this analysis. Other deal memos shown to the court expressly provided that they would be binding until replaced by a long form agreement, whether or not they bore the heading ‘subject to contract’.
However, the judge was satisfied that the supply of the label copy, CD and invoice amounted to an offer of a licence. The past tense had been used in the invoice to describe the services to which it related and Confetti knew of the tight timescale that Warner faced in order to meet the compilation album’s release date. Therefore, the language of the offer and the nature of the transaction made Confetti’s offer capable of acceptance by Warner’s conduct. Confetti’s first attempt to revoke the offer failed because the letter never arrived, and by the time of the second attempt production of the compilation album was sufficiently advanced for the offer to have been accepted, bringing a binding contract into existence.
Accordingly, Warner’s use of the track was not copyright infringement. The judge went on to comment that, had he found otherwise, he would have rejected Confetti’s claim for additional damages. He did not see how the copying could have met the necessary criterion of being flagrant when Warner clearly believed that it had a licence to use the track. (See also Ludlow Ltd v Williams & Others (2002), where, although a Robbie Williams album was released before clearance was obtained to use another artist’s lyrics on one track, EMI honestly believed that clearance would be given and so was not held liable to pay additional damages.)
The judge also addressed briefly the issue of estoppel. He held that the deal memo alone was not a representation that a licence had been granted because it was ‘subject to contract’. However, the subsequent supply of the label, CD and invoice comprised a representation that the heading could be disregarded. Since Warner had relied on this when committing itself to manufacturing Crisp Biscuit, Confetti would be estopped from denying the licence.

Ride like the wind
The manner in which Burnin was used on Crisp Biscuit gave rise to a separate claim by Alcee that his moral rights had been infringed. In addition to sections of a different song interposed in the middle of Burnin, Heartless Crew “rode the rhythm” (that is, rapped) over the entire track. Alcee claimed that this amounted to derogatory treatment of his work contrary to Section 80 of the Copyright Patents and Designs Act 1988. (It fell to Alcee to bring this claim since moral rights belong to the author of a work, irrespective of who owns the copyright).
Under section 80(2)(b) of the 1988 act, treatment is derogatory if “it amounts to distortion or mutilation of the work or is otherwise prejudicial to the honour or reputation of the author”. Alcee asserted that the rap contained references to violence and sex. However, there was no admissible evidence as to the meaning of the slang terms used. In any event, the judge held that the phrase “or is otherwise prejudicial” meant that distortion or mutilation alone was not enough in the absence of prejudice to the author’s honour or reputation. In Alcee’s case, there was no evidence of such prejudice, not least because of Alcee’s own flirtation with 1930s “mobster imagery” to promote his own music. His moral rights claim therefore failed (in fact, to our knowledge, a ‘derogatory treatment’ claim has yet to succeed in the UK).
Warner also argued that Section 80 should be read as being subject to the right of free expression enshrined in Article 10 of the European Convention on Human Rights. However, the judge doubted if there was much substance to this argument, given that Article 10 provides for exceptions to safeguard the reputations of others.

You gonna need my help
The case is a reminder that, even where licensing deals are required to be struck in a hurry, consideration should be given as to whether it is intended that the deal memo be binding. If it is, express wording to that effect should be used. If not, it should be marked ‘subject to contract’ and also state that a binding long form agreement will follow. Otherwise, subsequent conduct may muddy the waters, leaving the parties uncertain as to whether or not a binding contract exists.
As for moral rights, the case reinforces how hard it is for an author to establish derogatory treatment of their work. While many artists may capriciously take offence at the treatment their work receives, the requirement (as emphasised in this case) that their honour or reputation must be prejudiced ensures that a moral rights claim cannot succeed if fuelled only by a sensitive artistic temperament. That must surely be right, even if Alcee feels that it is a bum rap.
David Harmsworth is a solicitor in, and Stephen Gare is head of, Mayer Brown Rowe & Maw’s intellectual property and IT group