Pumping up the volume

The internet boom has thrust the music industry's lawyers into the technological age and high-tech cases are set to be the new headline-grabbers. Bal Khela reports on the new wave of cases and some classic disputes.

The glamorous world of pop and the conservative bar make uneasy bedfellows. But in a massive industry – worth a purported $40bn (£26.7bn) through CD distribution alone – that is also highly litigious, many barristers are keen to find an entrance into this lucrative market.

According to chairman and chief executive of MP3.com Michael Robertson, with new technology such as MP3 (which allows consumers to find, download and store music using the internet), the value of music distribution could more than double to $100bn (£67bn) annually. Despite the fact that the company has already been forced to pay out settlements of $75m (£50m) to Warner and $100m (£67m) to BMG for the rights to use the songs of other labels, Robertson is confident that the future of music lies with the MP3 format. New players such as MP3.com are threatening the power of record companies and the battleground of the internet is a source of disputes for lawyers to get their teeth into.

But despite the potential of MP3, the industry is continuing to consolidate, leaving individual artists increasingly exposed and without protection from exploitation by major labels. Music mergers such as AOL/Time Warner, with market capitalisation of $113bn (£75.5bn), and Vivendi Universal, with market capitalisation of $100bn (£67bn), cause the balance of power to weigh against the individual. One leading barrister even warns that restraint of trade could make a comeback under the guise of European competition law if “incidences of artists sacking managers due to pressure from record companies” continues.

The Woolf reforms have also diminished the power of the smaller artist. Lawyers are less likely to take a punt on emerging artists involved in disputes because of the front-loading of cases.

The recent MCA dispute – it successfully argued that an artist colluded in copyright infringement and therefore the artist was held liable – highlighted the strength of major record labels. Andrew Sutcliffe of 3 Verulam Buildings is representing the artist and sees this as an example of “power shifting”.

Music, like most other legal areas, is also going to feel the effects of the Human Rights Act. Many barristers believe that the act's incorporation in October will lead to a spate of free speech cases. Most litigation work currently comes from disputes over fiduciary duties, contractual arrangements and libel, audit claims, agency, and trust, but in the future there may be a rise in management and partnership disputes, competition, internet rights, piracy, copyright infringement, new format negotiations and multi-jurisdictional disputes.

Management and partnership disputes are set to rise as musicians continue to operate informally until a record company gets involved. “This usually occurs because most managers do not make written contracts with their acts but make an arrangement to take 20 per cent of earnings with a view to making a more formal agreement until they part company,” says Sutcliffe.

One source says: “Friction will increase between artists and recording companies as money is now the dominant factor. Insiders are already talking about music conglomerates getting rid of A&R [artists and recording, basically talent scout] departments in favour of marketing departments.”

But there will be always be unnecessary disputes that are brought to court. Richard Millett of Essex Court says: “One thing I've realised in bust-ups with stars, managers and labels is that there is a smack of collateral advantage because the press just can't keep away. That is not to say that the disputes are not genuine, but publicity can be a good thing.”

Ian Mill QC of Blackstone Chambers believes that record companies are unlikely to go to court unless there is a risk of an undesirable precedent being set. He adds that artists are also becoming weary. “A lot of egos have been badly bruised by court. People appreciate the length of time immersed in legal proceedings and that it can have a negative effect on your career… the creative juices can dry up in court,” he says.

However, music lawyers are seeing an upsurge in new types of actions. Mill is representing the Spice Girls in a case which is set to make legal history as, for the first time, a judge is set to review her own decision [see box]. And later on in the year, Mill will lead a landmark case representing the manager of child star Charlotte Church that could lead to a new authority on child acts. There has been no precedent in this area since a dispute involving The Hollies in 1968.

Instructing firms believe that it takes a certain kind of barrister to address the challenges of this unique world. Clintons litigation partner Andrew Charland says: “Selecting the right counsel is a case of horses for courses, but they must have three main qualities – intellectual ability, street fighter-like advocacy skills and nous.”

Clients seem to be less discerning. Millett says that they choose counsel on the basis of “liking your personality or demeanour”. Perhaps this is because barristers and musicians are more similar than one would think – both are self-employed and desperate for success. One barrister admits: “One always thinks this is one's last case. One is only as good as one's last case.”

Barristers operating in the music arena are an elite few, with Gordon Pollock QC, head of chambers at magic circle commercial set Essex Court, top of the tree. His presence in the courtroom is often more notable than the clients. Pollock took silk in 1979 and led Sony to victory in the now infamous restraint of trade case against George Michael in the early 1990s [see box].

The leading chambers for music work include Blackstone Chambers, Essex Court, 5 Raymond Buildings, 3 Verulam Buildings and 11 South Square. The Lawyer Award's Chambers of the Year 2000 Blackstone Chambers continues to be the benchmark for entertainment work with leading silks Robert Englehart QC, Ian Mill QC and leading senior juniors Robert Howe and Pushpinder Saini. Essex Court Chambers has Pollock, senior junior Richard Millett and Vernon Flynn, while 5 Raymond Buildings has Patrick Milmo QC and senior junior Stephen Bate. Andrew Sutcliffe is 3 Verulam Buildings' leading senior junior.

Fees are often dependent on a combination of the notoriety and ability of barristers. “It's a run of the mill game. The big silks are usually called for and, of course, they demand a fee” says Millett.

Pollock earns between £1.25m and £1.5m a year through a mixture of entertainment and commercial disputes, and according to Flynn is a rare breed. “Gordon is one of the best advocates I've seen… If I needed someone to litigate, I would choose Gordon if I could afford him,” he says.

But Pollock's fees would deter many, including Charland. He says: “Sometimes you don't need a Rolls-Royce to get you to the shop.”

The skills of a music lawyer are generally no different to those of a general commercial practitioner, although Charland thinks that much more is required than an interest and a reputation. He says: “Barristers must understand the industry, the personalities and the jargon.”

It is clear that the future of music is dependent on the digital revolution. Sutcliffe predicts: “There will be a rise in rights disputes over the internet, copyright infringement, piracy and partnership and management disputes.”

More significantly, the advent of the internet, introduction of new formats such as mini-discs, DVD and the much acclaimed but controversial MP3-type technologies, threaten the relative calm of the post-Sony era and should provide a healthy supply of work to the stars of the Chancery Division.

Securing your pension in the music business

Traditionally, the musician has shared the artist's view that to base their commercial livelihood on their chosen career is precarious. The 1950s and 1960s saw an explosion in popular music, initially fuelled by the availability of LPs and then cassettes, and a new lease of life followed later with the advent of CDs.

The response to public demand was increased investment in music publishers and record producers and distributors. The investment was used to widen protection afforded to copyright and to enhance its value. It was not long before the boom in the record business began to make a real contribution to some national economies and, in the wake of the growth in media music companies, an increasing number of musicians became wealthier than they might ever have dared to expect.

The revolution in distribution provided by the internet (in particular the possibility of distribution online) at first seemed to increase the possibilities for musicians to expand their wealth by distributing their work directly into the home, thereby cutting out the middleman. But the failure of the music business to introduce mechanisms to control that distribution means that writers and recording artists have found themselves at the mercy of those who play fast and loose with their work – reproducing it for no payment and almost undetected, and if detected, without any real fear of effective prosecution. They are aided and abetted by the world at large and the belief that accessing music directly without payment is not really theft.

The result is a feeling of insecurity and depression for the music originators and, by extension, a concern for music publishers and record companies (whether multinational or local) faced with diminishing returns, dwindling revenue streams and falling catalogue values. It calls into question whether continued investment in music can be assured of a return in the absence of effective measures to counter the depredations wrought by pirates.

Such is the turmoil that some believe that the Secure Digital Music Initiative (SDMI) and encryption systems are bound to fail and that it is no longer worth fighting to protect copyright at all. Computer file compression technologies, such as MP3, combined with digital file transfer software, such as Napster and Wrapster, pose a constant threat to the practical viability of copyright.

Musicians must now recognise that their return lies in the exercise of public performance and simulcast broadcast rights. But the intrinsic value of these has been substantially reduced in recent years because protection of them has been neglected.

The changing marketplace may compel record companies and music publishers to reconcile themselves to a different role, where their contribution lies in the promotion of music, the development of integrated all-encompassing productions and of interactive products adding value beyond that, which may be obtained merely from accessing music online.

But change may be slower than expected. A significant element of the population may still feel that it is easier to purchase CDs than to download them, particularly if multi-faceted products are developed. However, it may be a high-risk strategy to base investment decisions on the assumption that those with the requisite purchasing power will be too lazy to rely on online distribution.

Paddy Grafton Green is senior partner at Theodore Goddard.

Leading Chambers and Recent Cases

Blackstone Chambers

Ian Mill QC – Spice Girls Limited v Aprilia World Service BV, Silvertone Limited v Mountfield & ors (Stone Roses). Has represented a host of artists including U2, Michael Jackson and Eric Clapton

Robert Englehart QC – Tolhurst v Robert Smith & ors (The Cure) and McCarroll v Gallagher & ors (Oasis)

Barbara Dohmann QC – Hadley & ors v Kemp & anor (Gary Kemp) and Stock Aitken & Waterman v Pal Productions Limited

Robert Anderson – Has represented Michael Jackson, Seal, Spandau Ballet and Live Aid

Robert Howe – Client base includes MCPS, Polygram, EMI, Sony, Band Aid Trust, U2, Paul Weller, Morrissey and Michelle Shocked

Pushpinder Saini – Has acted for Lisa Stansfield, Oasis, Polygram, BMG, Warner Music, Universal Music, Sony and Island Records

Essex Court Chambers

Gordon Pollock QC – Elton John v Accountants

Vernon Flynn – Georgios Panayiotou (alias George Michael) v Sony Music, Michael Flatley v John Reid and EMI v Talking Heads

Richard Millet – O'Riordan & ors v Island Music (Cranberries), Bad Boy Touring Inc v Concert Organisation Inc (Puff Daddy)

5 Raymond Buildings

Stephen Bate – Ludlow v Williams (Robbie Williams), BMG, EMI and Stock Aitken v Waterman. Other cases at chambers have included Spice Girls matters

3 Verulam Buildings

Nicholas Merriman QC – MCA Records Inc v Charly Records, The Beatles v Lingalong and Creation Records v News Group

Andrew Sutcliffe – McCarroll v Gallagher and Perfect Songs v Polygram

Peter Ratcliffe – acting for Oasis in a management dispute

Major Cases

Georgios Panayiotou (alias George Michael) v Sony Music (29 June 1993)

Court: Chancery Division

Judge: Mr Justice Jonathan Parker

Counsel for George Michael: Mark Cran QC (Brick Court), Ian Mill QC (Blackstone), Pushpinder Saini (Blackstone), and Peter Leaver QC (One Essex Court) on European law issues

Instructing solicitors: Sheridans

Counsel for Sony: Gordon Pollock QC (Essex Court), David Unwin QC (7 Stone Buildings), Vernon Flynn (Essex Court), and the late Peter Duffy QC (formerly of Essex Court) on European law issues

Instructing solicitors: Clintons

Case: George Michael sought to have his recording contract declared void or unenforcable because he contended that the tie-ins threatened to sterilise his creative talent and they were contrary to Article 85 of the Treaty of Rome (in that they had the effect of preventing, restricting or distorting competition within the European Union).

Judgment: The case was dismissed on all points.

Spice Girls Limited v Aprilia World Service BV (May 1998)

Court: Chancery Division

Judge: Mrs Justice Arden

Counsel for the Spice Girls: Ian Mill QC (Blackstone), Vernon Flynn (Essex Court)

Instructing solicitors: Lee & Thompson

Counsel for Aprilia: Andrew Sutcliffe (3 Verulam Buildings)

Instructing solicitors: CMS Cameron McKenna

Case: In May 1998, Aprilia agreed to pay the Spice Girls more than £500,000 for the right to be the principal sponsor of their 1998 world tour, and for the right to use logos and images of the Spice Girls to promote sales of the company's Spice Sonic Scooter. Following band member Geri Halliwell's departure, Aprilia refused to pay more than £200,000 due under the agreement and the Spice Girls sued. Aprilia counter-claimed, alleging breach of contract and misrepresentation, claiming damages up to £6m (reduced to £1m).

First judgment: The claim for breach of contract was dismissed. However, the judge allowed the claim for misrepresentation and set a date for a further hearing to quantify the damages and decide whether the Spice Girls should be paid the remainder of the amount owed.

Second judgment: Aprilia was said to have suffered damages under £40,000. The Spice Girls would not be granted their claim because Aprilia would suffer further loss equal to the amounts that were being claimed.

On hearing the Spice Girls' application for permission to appeal, Mrs Justice Arden withdrew her second judgment (in the light of a concession by Aprilia) and the parties await her revised judgment.

Ludlow Music v Williams, Chambers, BMG and EMI (7 July 2000)

Court: Chancery Division

Judge: Nicholas Strauss QC sitting as Deputy Judge

Counsel for Ludlow Music: Pushpinder Saini (Blackstone)

Instructing solicitors: Sheridans

Counsel for Robbie Williams: Stephen Bate (5 Raymond Buildings)

Instructing solicitors: Harbottle & Lewis

Case: Ludlow's action is a claim for copyright infringement relating to a track called Jesus in a Campervan on Williams' last album. Two lines were used from a song written by Loudon Wainwright III called I am the Way in which the claimant owns copyright. The issues in the application include whether the amount taken is sufficient to amount to infringement and if so, whether an injunction should be granted.

Judgment: reserved until the end of July.