Last week, the Israeli Supreme Court ruled that ACUM, represented by Pearl Cohen Zedek Latzer Baratz, is entitled to grant licenses to use music in a commercial context, particularly on the Internet. The Supreme Court granted ACUM’s appeal over the Tel Aviv District Court’s decision. The judgment of the Supreme Court brings closure to an extended and heated dispute between ACUM and music publishers, some of whom are themselves ACUM members.
ACUM is an Israeli copyright collective society, engaged in licensing musical and literary works, and collecting and distributing royalties to the owners of copyright in the works. ACUM is the Israeli equivalent of foreign copyright collectives such as ASCAP and BMI in the United States, PRS and MCPS in the United Kingdom and SACEM in France.
The question on appeal was the scope of ACUM’s right to permit use of music, in a commercial context, on the Internet. In 2003 ACUM granted Walla, the operator of an Israeli web portal, a blanket license to use musical works in an online station. Immediately after its launch, Walla and Coca-Cola branded the station as “Coca Cola’s Music Site”, bearing the logo and colors of the soft drink company. By doing so, Walla violated the licensing terms, which prohibited using the licensed music for advertising purposes. ACUM and Walla reached a settlement agreement, pursuant to which Walla paid ACUM damages. Walla was consequently sued by music publishers. Among the litigants were plaintiffs claiming ownership of copyrights to songs of “The Doors”, as well as Tirtzah Ariel, the widow of the late Meir Ariel, an Israeli singer-songwriter. The plaintiffs alleged that with regard to the use of music within the context of advertisements, ACUM was not authorized to grant Walla a license and to settle the dispute. Consequently the plaintiffs argued that ACUM had infringed the copyrights in their songs.
In the District Court of Tel Aviv, Judge Dr. Daphna Avnieli opined that the “Coca Cola” brand was ingrained in the conscience of every user of the website, for the purpose of creating a profound, subliminal effect of advertising the brand, and that the use of the works in this fashion is thus deemed an advertisement. According to Judge Avnieli, even though the transfer deeds that the plaintiffs and ACUM executed, fully assigned the plaintiffs’ copyrights in their works to ACUM, without restricting their use for advertising purposes – the plaintiffs did not consent to grant ACUM the right to permit use for advertising. For this reason, the District Court held that ACUM was not authorized to settle the dispute with Walla without the participation and consent of the plaintiffs. The Supreme Court’s judgment reversed this decision.
The Supreme Court’s judgment clearly and succinctly sets out how legal documents are to be construed. The Court held that interpretation of contracts must trace the parties’ subjective intent. The contract’s language is the starting point for interpretation. The extrinsic circumstances surrounding the contract may also be considered. Only if it is impossible to trace the parties’ subjective intent, may the Court look into the contract’s objective purpose – the objectives and interests that this kind of agreement is meant to achieve.
ACUM members, including the plaintiffs, execute transfer deeds that assign the copyrights in the works they created, to ACUM. The Supreme Court held that these deeds were unequivocally drafted with the intent to grant ACUM full rights to public performance. “The language of the transfer deeds contains no restriction prohibiting ACUM from granting licenses for public performance of works in a commercial or advertising context, or obligating ACUM to obtain the author’s permission before granting such a license, both with respect to methods known on the day the deed is executed and those “later developed”, such as Internet broadcast”.
The clearer the contractual language, the greater the relative weight of extrinsic evidence necessary to supersede the meaning called forth by the contract's language. Because the language of the transfer deeds is plain and clear – the plaintiffs are faced with considerable onus to show that extrinsic circumstances contradict this conclusion. The circumstances preceding the execution of the transfer deeds are “…the contract’s closest ring. The respondents did not directly establish what the intent of the parties to the deeds was at the time of execution. They merely relied on an alleged trade usage in the music industry and on ACUM’s conduct subsequent to the execution.”
The question whether certain conduct is so acceptable in some fields that it effectuates trade usage, can only be answered retrospectively. The business model conceived by Walla and Coca-Cola was an innovative marketing concept, unprecedented in the music industry as well as in relation to the customary rules regarding copyrights in that industry. For this reason, there are no grounds for the premise that the business model is subject to the restrictions allegedly established by international trade usage regarding the assignment of the right to public performance for advertising purposes.
Finally, the Court held that ACUM’s request to obtain the author’s permission to use the music in advertisements stems from ACUM’s desire to overprotect the authors and safeguard their interests, even though they authorized ACUM to grant licenses to commercial entities. One example for this is when a concern arises that the license grant may infringe the author’s moral right.
Pearl Cohen Zedek Latzer Baratz represented ACUM in the proceedings, by counsel of Advocates Haim Ravia, Tal Kaplan and Dan Or-Hof. The respondents were ordered to pay each appellant 20,000 NIS (approximately 6,000 US Dollars).