Calculating the value of the hypothetical bargain: a substantial part of “Kookaburra” ≠ a subs

Calculating the value of the hypothetical bargain: a substantial part of “Kookaburra” ≠ a subs

Calculating the value of the hypothetical bargain: a substantial part of “Kookaburra” ≠ a subs

Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Limited (No 2) [2010] FCA 698

As reported in the March 2010 edition of the IP Update, the Federal Court of Australia decided in February this year that two bars of the four-bar musical composition “Kookaburra Sits in the Old Gum Tree” (“Kookaburra”), were reproduced in the flute riff of Men at Work’s “Down Under”. Despite finding that reproducing 50% of the nursery singing round infringed Larrikin’s copyright, in this next instalment the Judge has ruled that the contribution of Kookaburra to Under Under overall is relatively small, entitling Larrikin to a 5% interest in the royalty income generated from the Australian pop anthem.

In February this year Justice Jacobson held that the composers and the recording companies of Down Under (referred to together in this article as “the respondents”) had misrepresented to royalty collecting societies that Down Under did not infringe the copyright in any other work and that they were entitled to 100% of Down Under performance and recording income. His Honour emphasised, however, that his findings on copyright infringement and misrepresentation did not amount to a finding that “the flute riff is a substantial part of Down Under or that it is the “hook” of that song”.1 The question to be determined this time around was what percentage of Down Under’s income the respondents should be required to pay Larrikin. Larrikin claimed to be entitled to a 40-60% interest.

The hypothetical bargain approach

The parties agreed that the loss or damage which flowed from the Judge’s February findings was that Larrikin was not paid any income derived from the exploitation of Down Under. It was also common ground that the appropriate percentage is to determined “upon the basis of a hypothetical bargain that would have been struck between a willing licensor and a willing licensee of the copyright in Kookaburra”.2

Justice Jacobson identified three factors which inform the hypothetical bargain that would have been struck between the owner of the copyright in Kookaburra and the respondents:

  1. the musical significance of the “offending” bars of Kookaburra that appear in the Down flute riff;
  2. comparable agreements negotiated for sampling a copyright work in a later work; and
  3. the date when the bargain is taken to have been negotiated.

A further critical issue for consideration was whether Larrikin should be entitled to be paid the appropriate percentage on all versions of Down Under or only those versions which reproduce the first two bars of Kookaburra.

The musical and thematic significance of Kookaburra

The respondents submitted that it was telling that the resemblance between Kookaburra and the flute riff in Down remained unnoticed by the public for more than 20 years until it was raised on the ABC television show Spicks and Specks. The principal of Larrikin, Mr Lurie, gave evidence that Kookaburra is easily recognisable, once it is pointed out and evokes the Australian national identity.

While accepting that the two bars of Kookaburra were essential to Down Under’s flute sequence and added to the commercial appeal of the song, Justice Jacobson pointed out that there were other important elements of the song including the introductory flute line (not including the offending bars), the verses and the chorus, Colin Hay’s vocal and the reggae sound. The Judge considered that the contribution of Kookaburra to the entirety of Down Under is relatively small.

In addition, the inclusion of Kookaburra was intended to inject an Australian flavour to the song, however, there were many other references to Australia and Australiana throughout Down Under such that His Honour regarded the contribution of the two bars of Kookaburra to the overall theme as quite low. The same could be said about the significance of visual references to Kookaburra in the Down Under video clip.

The fact that Mr Hay would sometimes sing the words of Kookaburra during performances of Down Under at concerts was found to be irrelevant to the question of Kookaburra’s significance to Down Under considered as a whole.

Comparable samples

Both Larrikin and the respondents proffered examples of percentages that had been negotiated in other instances of sampling. His Honour approached the evidence adduced on “comparables” with caution having regard to the fact that each sample was different and that the factors which informed the outcome of the negotiations were not fully available.

The Judge distinguished from the present case samples where the copyright work in the derivative work are instantly recognisable and extensively used, noting that it took more than 20 years to recognise the first two bars of Kookaburra in Down Under.

Ultimately, a figure of less than the 7.5% negotiated in relation to David Bowie’s song “All the Young Dudes” which was sampled in a song by Green Day entitled “21 Guns” was found to be the most appropriate comparator.

The relevant date

Larrikin contended that the relevant date for consideration of the hypothetical bargain is 1982. At that time, Kookaburra was a well known song in Australia and the composer, Miss Marion Sinclair, was well known as its composer. By comparison, Men at Work was a virtually unknown band. However, the relative fame of Kookaburra was found to be offset by factors which pointed to a “small royalty” such as that the sample of Kookaburra is not immediately recognisable, that the musical and thematic significance of Kookaburra in the whole of Down is at the low end of the spectrum, and that Mr Hay would have been reluctant to surrender any share of the income from Down Under.

The respondents submitted that the relevant date at which to analyse the measure of Larrikin’s loss is May 2002 because by the operation of limitation of actions legislation damages could be claimed only for the six year period commencing on 20 May 2002.

Jacobson J was of the view that the correct date to assess Larrikin’s loss is as at 1982, being the time when the relevant misrepresentations were first made (but which continued during the limitation period) and when royalty societies started paying 100% of the Down income to the respondents.

Entitlement to royalties from non-infringing version of Down Under

As to the issue of whether the hypothetical bargain should include payment of royalties on all versions of Down Under, the Judge held that Larrikin could not claim royalties in respect of non-infringing versions of Down Under. Jacobson J accepted that the usual practice in the music industry was for a royalty to be paid on all versions of the derivative work even if the earlier work is not reproduced, but that it was highly unlikely that an arrangement would have been made for a royalty to be paid on all versions of Down Under regardless of whether or not the derivative work contains the first two bars of Kookaburra.

The Court’s finding on percentage payable

In the result, the Judge considered the figures put forward by Larrikin to be “excessive, overreaching and unrealistic”3 arriving at the figure of 5% as the total percentage payable to Larrikin of royalty income. Critical to Jacobson J’s reasoning was the difficulty in detecting the similarity between the flute riff and the bars from Kookaburra, and His Honour’s impression that the significance of the bars of Kookaburra to Down Under as a whole is relatively small.

The appeal from the trial judge’s ruling on liability was set down for hearing before the Full Court in August.

Endnotes

  1. Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Limited [2010] FCA 29 at [339].
  2. Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Ltd (No 2) [2010] FCA 698 (“Kookaburra 2”) at [8].
  3. Kookaburra 2 at [224].