Case No:98/6464/A3
 
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
THE VICE-CHANCELLOR
Royal Courts of Justice
Strand, London, WC2A 2LL

Thursday 30th March 2000

B e f o r e :

LORD JUSTICE ALDOUS
LORD JUSTICE WALLER
and
MR JUSTICE ROUGIER

PHONOGRAPHIC PERFORMANCE LIMITED
(Appellants)
and

CANDY ROCK RECORDING LIMITED
(Respondents)
- - - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040,  Fax No:  0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Jonathan Rayner James QC and Stephen Bate (instructed by Hamlin Slowe for the Appellants)
Mark Cunningham (instructed by The Simkins Partnership for the Respondents)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court

Crown Copyright ©

Lord justice ALDOUS:
1.  Phonographic Performance Ltd (PPL) appeal with leave of this Court against the order of the Vice-Chancellor which in part dismissed their appeal against conclusions reached in an interim decision of the Copyright Tribunal dated 10th November 1998.  PPL submitted that the Copyright Tribunal had erred in law in the way it had determined the royalty to be paid by Candy Rock Recording Limited and the Vice-Chancellor should have so held and then remitted the reference back to the Copyright Tribunal for further consideration.  

2.  Under the Copyright, Designs and Patents Act 1988 copyright exists in original musical works and in sound recordings of musical works.  The owner of the copyright has the exclusive right, amongst other things, to copy the work, to issue copies to the public, to perform the work in public, to rent or lend the work to the public and to broadcast it.  

3.  In most countries, organisations have been created which control the exercise of copyright in performing and recording rights.  Such organisations either acquire the copyright from members, or act as their agents, so as exploit and enforce the copyright.  To do this they issue licences and collect royalties in respect of their members' works.  From the point of view of owners of copyright, the system has advantages in that it enables them collectively to obtain recompense for the work they have done.  The system also has advantages from the point of those wishing to use such works as licences can be obtained from a single source.  

4.  PPL is such an organisation.  It is a company limited by guarantee and acts as the licensing body in the United Kingdom for its members, currently numbering some two thousand record companies, which produce the vast majority of all sound recordings released in the UK.  PPL grants licences on behalf of its members in respect of sound recordings and collects royalties and, after deduction of expenses, distributes those royalties to its members in proportion to the usage by licensees of members' recordings.  PPL's licence fee income in the year ending 1997 was reported as being over £47 million and over £37 million was distributed to its members.  

5.  Candy Rock is a relatively small company which in the year ending March 1998 had a turnover of about £1,260,000 with net profits of just over £28,000.  As held by the Copyright Tribunal, it had the second largest market share of the background music dubbing industry.  

6.  Background music used in shops, hotels and the like, essentially falls into two categories: music in recordings made by original artists and music which is sometimes referred to as non-copyright music.  Traditionally background music was supplied by commercial dubbers on tapes, now compact discs or CDi's, containing a selection made by the relevant company.  The music would be carefully chosen and categorised into various moods and styles so that the owner of the premises in which the music was to be played could choose what styles suited the premises and indeed the style could be varied according to the time of day or the time of the year.  Use of original artists recordings meant that dubbers had to obtain licences from PPL.

7.  In order to carry on its business, Candy Rock has to obtain a dubbing licence from PPL.  Having obtained its licence, it is at liberty to dub PPL's sound recordings onto tapes, compact discs or CDi's and to hire them out to their customers for use as background music.  Each customer must also obtain from PPL a licence to perform the works using the tapes, compact discs or CDi's supplied by Candy Rock (see Section 19(3)), unless the playing is carried out by a charitable organization and for the purposes of that organization (see section 67)).  Without such a licence the playing of the music in public would be an infringement of copyright.  

8.  As an alternative to obtaining background music from commercial dubbers, such as Candy Rock, owners of commercial premises can, at their option, use broadcasts from established radio stations such as the independent local radio station.  The advantage of so doing is that no fee is payable to PPL (see section 72); the disadvantage is that the site owner has little control over the content of the programme.  It is also possible to distribute background music programmes by satellite.  AEI Rediffusion Music Ltd provide such a service.  The signal containing the music that is produced by AEI is encrypted so that only subscribers to AEI's service can hear an intelligible sound, known as a "narrowcast" because the broadcast is to a narrow spectrum of subscribers.  The technical procedure by which AEI do this was described in this way by Lightman J in Phonographic Performance Ltd v AEI Rediffusion Music Ltd [1997] RPC 729 at 731:
"(1) AEI programmers select tracks from the library of sound recordings which is held by AEI; (2) the selected tracks are recorded onto digital audio tapes ("DATS") in order to allow for equalisation of sound levels and quality; (3) the sound recordings on the DATs are recorded onto gold compact discs ("Gold Discs"); (4) the Gold Discs are installed in 10 special playback systems each holding 100 Gold Discs, which allow for random access to sound recordings (akin to large "jukeboxes"); (5) AEI programmers select the sound recordings which they wish to form part of a particular selection and input this selection into a computer; (6) the computer automatically controls the playback from the Gold Discs of the sound recordings which have been selected, (7) during playback the selection is simultaneously encrypted (to prevent access by non-subscribers) and broadcast via the "Eutelsat" satellite to subscribers throughout Europe; (8) the subscribers "decode" the transmission using equipment provided to them by AEI, allowing them to use the transmission within their own premises."		
9.  Narrowcasters need a licence from the PPL to broadcast (see section 20), but  Sections 135A-G make provision for what is in effect a statutory licence with a detailed procedure for setting the terms of such a licence.  Such a licence includes by virtue of section 68, a licence to copy a sound recording conditional inter alia upon destruction of the copy within 28 days.  That is inconvenient and costly and therefore AEI have negotiated a licence from PPL to allow retention of copies made for narrowcast broadcasting.   Not all the customers of narrowcasters who receive and play the broadcasts have to have a licence, as section 72 of the 1988 Act provides that the playing in public of a broadcast to an audience which has not paid for admission does not infringe copyright.  Those that require payment for admission, as defined in section 72(2), need a site licence.  

10.  As I have pointed out, the existence of organisations such as the PPL are to the advantage both to the music industry and to the public.  However it was felt necessary that a measure of public control over the activities of such organisations was necessary in the public interest.  Thus, since 1956, legislation has been in existence enabling licences to be obtained and for regulating the terms of those licences.  This is achieved under the 1988 Act through the Copyright Tribunal which determines disputes as to schemes operated by licensing bodies, such as PPL, and also disputes as to whether a licence should be granted and, if so, its terms.  The Copyright Tribunal sits with a legally qualified chairman and two or more ordinary members.  

11.  Candy Rock have for many years been licensees of PPL upon terms agreed between them.  On 24th March 1995, PPL's solicitors wrote to Candy Rock setting out the basis upon which PPL proposed to grant a licence for the twelve month period beginning on 1st April 1995.  The letter required Candy Rock to give four undertakings and stated that were Candy Rock to decline to agree to the proposals, PPL would refuse to grant Candy Rock a fresh licence and would sue for breach of contract and infringement of copyright.  The proposed licence was not acceptable to Candy Rock and on 30th March 1995, Candy Rock applied to the Copyright Tribunal under section 126 of the Act for an order requiring continuation of the licence that existed at that date.  That was followed by a reference under sections 119 and 125.  The references under sections 119 and 126 were struck out by the Tribunal, leaving that under section 125.  That section is in these terms:
"125 (1)  The terms on which a licensing body proposes to grant a licence may be referred to the Copyright Tribunal by the prospective licensee.  
...
(3)  If the Tribunal decides to entertain the reference it shall consider the terms of the proposed licence and make such order, either confirming or varying the terms, as it may determine to be reasonable in the circumstances.
(4)  The order may be made so as to be in force indefinitely or for such period as the Tribunal may determine."		

12.  The reference under section 125 came before the Copyright Tribunal which issued its interim decision on 10th November 1998, leaving over the drafting of the licence reflecting the conclusion reached in the interim decision.  There cannot be an appeal against the findings of fact of the Copyright Tribunal, but section 152(1) of the Act provides that "an appeal lies on any point of law arising from a decision of the Copyright Tribunal to the High Court".  Pursuant to that subsection, PPL appealed.  They raised a number of points which they contended showed that the Copyright Tribunal had erred in law.  Except for one, which is not relevant in this Court, the Vice-Chancellor dismissed the appeal.  In this Court PPL have not pursued all the issues raised before the Vice-Chancellor, but have restricted their submissions so as to concentrate on one matter albeit advanced in cumulative submissions.  To understand those submissions it is necessary to go, in some detail, into the arguments raised before the Copyright Tribunal.  

13.  The factors to be taken into account by the Copyright Tribunal in particular cases are set out in sections 129-135.  Relevant to this appeal are sections 129 and 135 which are in these terms:
"129.  In determining what is reasonable on a reference or application under this Chapter relating to a licensing scheme or licence, the Copyright Tribunal shall have regard to -

(a)	the availability of other schemes, or the granting of other 
	licences, to other persons in similar circumstances, and
	(b)	the terms of those schemes or licences,

and shall exercise its powers so as to secure that there is no unreasonable discrimination between licensees, or prospective licensees, under the scheme or licence to which the reference or the application relates and licensees under other schemes operated by, or other licences granted by, the same person.  
...
135.  The mention in sections 129 to 134 of specific matters to which the Copyright Tribunal is to have regard in certain classes of case does not affect the Tribunal's general obligation in any case to have regard to all relevant considerations."		

14.  The Copyright Tribunal in AEI Rediffusion Music Limited v Phonographic Performance Limited [1998] RPC 335 had to consider whether guidance could be obtained from licences granted to companies that carried out dubbing to settle the terms of a licence to enable AEI to carry out narrowcasting.  The Tribunal held that dubbers, such as Candy Rock, were in competition with narrowcasters and that the licences for dubbers could be used as a comparator.  It said at page 352:
"It seems to us really unarguable to suggest that the two are not very similar, and we have no doubt that the AEI satellite service will be in competition with on-site dubbing provided by the other commercial dubbers.  .....  In the light of this evidence it is clear that there is no dichotomy between the two forms of background music service.  The markets for the two methods of delivery are not exactly co-terminous but there is a very substantial overlap.  In our view, therefore, the existing commercial dubbing licences are a useful comparator to assist us in determining a royalty for satellite broadcasting.  However, whilst in principle the dubbing licences can act as comparators, we are faced with the problem that it is not easy to determine from these licences what exactly is the true royalty basis that one can regard as being typical of the dubbing licences."

15.  It is not surprising that the Copyright Tribunal in this case took account of the conclusion reached in the AEI reference.  But it seems that in that reference the Copyright Tribunal did not have drawn to its attention the fact that most site operators who use narrowcast broadcasts did not need a site licence having regard to section 72, whereas the contrary was true for the customers of dubbers.  

16.  In a letter received by the Chairman of the Copyright Tribunal shortly before the hearing, a company called GMS Music, which carried on business as a dubber, sought to intervene.  They alleged that PPL had treated narrowcasters and dubbers differently because the customers of narrowcasters did not have to pay a site licence whereas the customers of dubbers had to.  It went on:
"We have customers that if we supplied our music at no charge, it would cost them more to utilize our music service than a satellite supplier's service because of the site fee.  That cannot be right!"		

17.  At the outset of the hearing the Chairman of the Copyright Tribunal drew the parties' attention to the letter and they were supplied with a copy.  It was not referred to in evidence or argument except Mr Rayner James QC, counsel for PPL, did in his final speech mention it to illustrate his submission as to the correct approach to section 129 having regard to section 72.  Even so, the point made by GMS was taken up in the interim decision.  

18.  The Copyright Tribunal said:
"In this reference, both PPL and Candy Rock accept that the AEI narrowcast licence constitutes the closest comparator, but this Tribunal is faced (in reverse) with the same problem as that referred to in the last quoted sentence above.

In accepting the AEI narrowcast licence as the relevant comparator, it is necessary to recognise a fundamental difference (as far as the Act is concerned) between the services provided by the dubbers and the narrowcasters.  As far as the recipient is concerned, the products (background music) are indistinguishable - however, the customer of a dubber must pay PPL a fee for playing tapes or CDs in public.  This is the so-called "site performance fee", an indexed linked tariff fee currently levied by PPL on some 150,000 sites.  By contrast the customers of narrowcasters pay no such site performance fee because what is presented in public is technically a broadcast.  

PPL argued before us that this difference arises from the structure of the Act and that (to quote Mr Rayner James): 

"There is nothing that can be done about it so far as the Tribunal is concerned in its approach to royalties."  	

If PPL's argument is that we should endeavour to ensure that a dubber pays the same royalty to PPL as a narrowcaster, and ignore the commercial reality that a potential customer will receive PPL's public performance fee as an additional charge to be taken into account in choosing between the rival services, then we reject that argument.  While Section 129 of the Act admits of some discrimination between the licensees, the Tribunal is required to ensure that any such discrimination is not "unreasonable".  To illustrate the point, let us assume that the commercial dubbers are required to pay on exactly the same basis as AEI (when operating as a narrowcaster).  If the dubber and narrowcaster were to quote the same price to the customer, it would not be surprising to find that the dubber lost business to the narrowcaster and in addition, of course, PPL would lose site performance fees.  We conclude, therefore, that in avoiding "unreasonable discrimination" we should set the per minute rate at a level which will permit Candy Rock and other dubbers to compete with narrowcasters."					
19.  Having come to that conclusion, the Copyright Tribunal ended up by setting a rate that it considered created such a result.  Its approach is illustrated by this passage from page 12 of the decision:
"The rates of 1.75p and 2.75p we have decided on are equivalent (for the year to March 1998) to an average per site fee of a little over £38 per year.  This would suggest that Candy Rock will be paying an average £22 per site less than AEI (when acting as a narrowcaster).  Since, as we understand it, the PPL site performance fee is currently of the order of £70, we consider that the differential of £22 not to be unreasonable."	
20.  PPL contend that the Copyright Tribunal was in error when setting the level of royalty so that it would permit Candy Rock to compete with narrowcasters.  Their submission was recorded by the Vice-Chancellor in this way:
"Mr Rayner James QC, counsel for PPL, has submitted that the Tribunal misdirected itself in relying on the site licence fees, from which a narrowcaster's customers are exempt, in order to justify the £22 per site differential between the per site rate payable by AEI and the per site rate payable by Candy Rock (translated from the per minute rate that the Tribunal was proposing to fix).  The section 72 exemption, Mr Rayner James pointed out, is part of the statutory scheme.  So, too, the site licence fees payable by customers of commercial dubbers are part of the statutory scheme.  The Tribunal had no business to try and remove the differential that the statutory scheme produces.  The Tribunal should have been treating the minimum rate chargeable to AEI, the £60 per site, as the comparator to arrive at a comparable per minute rate to be charged to Candy Rock.  Section 129, in forbidding "unreasonable discrimination" between business, requires a comparison of the rates charged to comparable licensees.  It does not require that in any other respects a level playing field on which the licensees can compete be produced."	

21.  The Vice-Chancellor accepted those submissions in part.  He said:
"I agree with many of these points.  I agree, in particular, that section 129 requires a comparison between the rates and terms of the respective licences of the competing licensees and does not require the Tribunal, in fixing the terms of the licence, to try and compensate for a competitive edge that one licensee may have over another, whether derived from section 72 or from anything else.  But I agree, also, with Mr Barker, counsel for Candy Rock, that section 135 of the Act, in requiring 'all relevant considerations' to be taken into account, does not allow the Tribunal to take into account that a customer of dubbers must pay a site licence fee and, with the Tribunal, that the Tribunal must not ignore the "commercial reality" of the competition between dubbers and narrowcasters.

In my judgment, the Tribunal in the present case was in error in concluding that section 129 required them to 'set the per minute rate at a level which will permit Candy Rock and the other dubbers to compete with narrowcasters.  Section 129 required that the rates and terms set by the Tribunal should not discriminate unreasonably between comparable licensees.  Section 129 does not require the rates and terms set by the Tribunal to compensate for competitive advantages that one licensee may have over another.  However, the Tribunal was, in my judgment, fully entitled to take into account, as one of the section 135 'relevant considerations' that Candy Rock customers have to pay site licence fees, whereas a narrowcaster's customers do not.  I do not think that the Tribunal's misdirection regarding section 129 can be said to have led to any 'substantial wrong or miscarriage' (Order 55 rule 7(7))."	

22.  PPL supported the Vice-Chancellor's conclusion that it could not be right that the Tribunal should under section 129 regard itself as trying to compensate for a competitive edge that one licensee might have over another, because of the effect of section 72 of the Act.  Section 129 required the Copyright Tribunal to have regard to the terms of other licences and to exercise its power so as to secure no unreasonable discrimination between licensees of PPL.  Thus the Copyright Tribunal was required to look at the terms of the licences and exercise its powers to avoid unreasonable discrimination.  In this case the product marketed by dubbers and narrowcasters was essentially the same and therefore, to avoid unreasonable discrimination, the royalty rate should be essentially the same.  The fact that in most cases a customer of a dubber would require a licence from PPL, whereas many, if not most, of the customers of narrowcasters would not, was irrelevant.  The section required comparison of licences for equivalent rights, not an analysis to enable fair competition.  They submitted that that approach was no less appropriate under section 135.  The Copyright Tribunal did not operate as a type of regulatory body charged with ensuring fair and effective competition between copyright users.  In this regard they referred to section 2(2) of the Broadcasting Act 1990 where a duty was laid upon the Independent Television Commission to ensure fair and effective competition in the provision of services.  Section 135 only required the Copyright Tribunal to have regard to "relevant considerations".  The fact that customers of dubbers required a site licence and those of narrowcasters did not, was the effect of section 72.  It was an irrelevant consideration when setting the value to be paid for the right to use PPL's copyright.  

23.  PPL also drew attention to the way that the suggestion, adopted by the Copyright Tribunal, that regard should be had to the fact that PPL received a licence fee from the customers of dubbers but not from all the customers of narrowcasters, came into the reference.  It was not pleaded nor was it canvassed in evidence, but was introduced through the GMS letter in the way I have already explained.  They submitted that if the Vice-Chancellor was right that the Copyright Tribunal had misdirected itself by taking that matter into account under section 129, but should have taken the matter into account under section 135, he was wrong not to remit this reference back to the Copyright Tribunal for further consideration.  In view of the lack of pleading and evidence on the matter, in particular the failure to consider how many customers of narrowcasters and dubbers did need licences and what was the income received by PPL, he could not have been sure that a substantial wrong or miscarriage would not be occasioned, as required to invoke Order 55 r.7(7) of the CPR.  He therefore fell into error by applying that rule.  

24.  Candy Rock submitted that the Copyright Tribunal had made no error in law.  It was not limited, when exercising its powers under section 129, to a comparison of the narrowcaster and dubber licences.  As had been made clear in a number of decisions of the Copyright Tribunal, the Act required the decision as to what was "reasonable in the circumstances", the test to be applied under section 125, to reflect commercial reality.  The fact that the customers of dubbers had to pay a site licence fee to PPL and the customers of narrowcasters did not (referred to by Candy Rock as the site licence factor), was, they submitted, a commercial fact.  They accepted that it arose from the Act and in particular section 72, but that was irrelevant.  What was important was the factual position in the market place.  They drew attention to this submission made by PPL, recorded in the AEI case at page 343, lines 25 to 31 and accepted by the Tribunal in that case, as the proper approach:
"... ultimately, what we have to determine is, of the total profit made by the licensee, how much should be paid to PPL for the right to use their recordings.  In doing so, the Tribunal has to arrive at a figure from the overall receipts which is both fair to the licensor in terms of the value to the licensee of having access to the copyright sound recordings, and also fair to the licensee in giving him a proper reward for the effort put into the exploitation of the licensor's intellectual property rights."		
25.  Candy Rock submitted that when carrying out that task the Copyright Tribunal could not ignore commercial reality.  The site licence factor was part of that reality.  In general, PPL received royalties from dubbers and from their customers, whereas they received royalties from narrowcasters, but not their customers.  As the product, background music, was the same that difference needed to be taken into account to secure that there was no unreasonable discrimination.  If it was ignored the terms of the licences for dubbing would unreasonably discriminate against dubbers and would cause the dubbing business to wither.  

26.  Mr Cunningham, who appeared for Candy Rock, accepted that enabling a person to compete was not the same as avoiding unreasonable discrimination.  He submitted that the Copyright Tribunal had not fallen into error when taking into account the site licence factor.  The sentence on page 10 of the decision - "We conclude, therefore, that in avoiding 'unreasonable discrimination' we should set the per minute rate at a level which will permit Candy Rock and the other dubbers to compete with narrowcasters" - needed to be read in context.  When so read, it was clear that the Copyright Tribunal had sought to avoid unreasonable discrimination.  To support that submission, Mr Cunningham drew attention to the way that the Copyright Tribunal arrived at the royalty rate.  At the outset it referred to the AEI case and the conclusion in that case that the dubbing licences were useful comparators when considering what should be the appropriate the terms for a narrowcaster's licence.  The Copyright Tribunal in the AEI case had correctly pointed out that it needed to avoid setting rates which would discriminate between narrowcasters and dubbers.  To do that it set a royalty for AEI of 15% as the first tier rate and £60 per site as the minimum royalty.  An equivalent rate for a dubbing licence, according to the evidence of PPL in this reference, would have resulted in a royalty rate of 2.75p per minute for tapes and 4.58p per minute for CD's.  The Copyright Tribunal in this reference reduced that figure, having regard to the site licence factor; that PPL had described the outcome of the AEI decision as highly favourable; Candy Rock's business had not grown and other dubbers had gone out of business; the record industry had not been able to increase its prices and Telstar paid 2.37p per minute.  The result of 1.75p per minute for tapes and 2.75p per minute for CDs represented 20.5% of revenue which was basically equivalent to the 19% of average music income paid by AEI for narrowcasting.  That resulted in the Copyright Tribunal making the observation on page 12 (see above) that Candy Rock would have to pay the equivalent of a site fee of £38 per year and that their customers would pay £70 per year.  That was stated not to be unreasonable when compared with the £60 per site per year to be paid to AEI.  

27.  Candy Rock submitted that in so far as the Vice-Chancellor held that the site licence factor was not relevant under section 129, or that the Copyright Tribunal misdirected itself, he was wrong; but his conclusion that it was a relevant circumstance was correct and that he was right to apply CPR Order 55 r.7(7).  

28.  I am grateful for the clear written and oral submissions of counsel which show the benefit gained from experience at the hearing before the Vice-Chancellor and from his judgment.  They have helped me to come to the conclusion that the Copyright Tribunal did not misdirect itself as to the law.  

29.  The task for the Copyright Tribunal was to arrive at terms for the licence which were reasonable in the circumstances (section 125).  As is made clear in section 135, that obligation requires the Tribunal to have regard to all relevant considerations.  Nothing is excluded provided it is relevant to determining the terms of the licence.  The weight to be given to any circumstance is a decision for the Copyright Tribunal.  Section 129 does not expand the ambit of the considerations that are relevant.  It refines the jurisdiction under section 125.  It requires the Copyright Tribunal to have regard to other licences i.e. comparable licences, and to exercise its powers consistently with section 125 "so as to secure that there is no unreasonable discrimination ...".

30.  I reject the submission that section 129 is limited to a comparison between licences granted by the same person.  The Copyright Tribunal must seek to secure that there is no unreasonable discrimination.  What might amount to unreasonable discrimination will depend on the terms of the respective licences when operated.  To divorce the licences from commercial reality would prevent the Copyright Tribunal achieving its overall objective of a licence containing reasonable terms.  Thus to compare the AEI narrowcast licence with the proposed licence for a dubber, such as Candy Rock, without having regard to the way that PPL obtain their revenue for background music, would amount to a false comparison.  The site licence factor was a factor which was relevant for the Copyright Tribunal to take into account when seeking to secure that there was no unreasonable discrimination between licensees.  

31.  Section 129 does not require the Copyright Tribunal to secure fair competition.  The word used in the section is "discrimination" and it does not follow that a non-discriminatory licence would result in fair competition.  It is therefore unfortunate that the Copyright Tribunal said "we should set the per minute rate at a level which will permit Candy Rock and other Dubbers to compete with narrowcasters".  Their task was to set the per minute rates at levels which would ensure that there would not be unreasonable discrimination against Candy Rock and other dubbers having regard, in particular, to the rate paid by narrowcasters.  In my view that was what the Copyright Tribunal did.  The sentence which I have just quoted must be read in the context of the whole of the decision dealing with this part of the reference.  The Copyright Tribunal was right to conclude that the site licence factor was a relevant consideration when deciding how to avoid unreasonable discrimination.  On the evidence before the Copyright Tribunal, PPL charged the customers of dubbers £70 a site and the royalty proposed by them was the equivalent of £60 a site.  Thus, leaving aside collection costs, the amount sought by PPL for the playing of background music supplied by dubbers was £130.  That had to be contrasted with the £60 per site paid by narrowcasters.  In the light of that evidence, incomplete as it may have been, the Copyright Tribunal were entitled and in my view bound to conclude that the inclusion in the licence of the royalty rate proposed by PPL would unreasonably discriminate against Candy Rock.  Having considered the evidence it arrived at a royalty rate equivalent to £108 per site per year which it concluded was the rate which avoided unreasonable discrimination.  
	
32.  The effect provided by section 72 on dubbers and narrowcasters was a relevant factor to ensure the absence of unreasonable discrimination.  The product to be licensed was the same, but the way that PPL obtained its recompense for use was not.  To avoid discrimination the difference needed to be examined and adjustment made if the Copyright Tribunal thought necessary.  

33.  Mr Rayner James accepted that if the Copyright Tribunal had not misdirected itself as to how to apply section 129, which in my view it did not, there was no error of law about which PPL could complain.  I agree.  However I have misgivings as to the way that the Copyright Tribunal relied on the site licence factor.  Candy Rock did not rely upon it in its pleading and neither party directed their submissions or evidence to the issue.  The result was that the Copyright Tribunal dealt with it upon incomplete evidence without considering what proportion of narrowcasters' customers charged payment for admission with the result that a site licence had to be obtained (see section 68).  Also consideration was not given to the costs of licences that AEI had had to negotiate to avoid the 28 day restriction on retention of copies contained in section 68.  If further references relating to background music come before the Copyright Tribunal, the site licence factor must be pleaded so that the parties' evidence can be directed to the relevant issues.

34.  I have arrived at the same conclusion as the Vice-Chancellor, albeit via a different route.  I would dismiss this appeal.  

lord justice WALLER:
35.  I agree.  

Mr justice ROUGIER:
36.	I also agree.  

Order:  Appeal dismissed with costs to be assessed on a standard basis if not agreed; Permission to appeal to the House of Lords refused;  Claimants to pay £20,000 to the Defendants account.
(Order does not form part of the approved judgment)