Universal Studios International BV v Flextech Rights Ltd (2005)
A judge should have declined to decide as preliminary issues questions that ultimately involved issues of fact and not law, since his conclusion could only have been reached on the assumption that all the facts alleged and no others were established at trial. The judge had been wrong in principle to determine whether individual episodes of a television series were similar in content to the totality of a previous series and whether the dissimilarity was sufficient to justify dissolution of a licence agreement.
The appellant Dutch company (U) appealed against the determination of certain preliminary issues ((2005) EWHC 2267 (Comm)). U was an international licensor of television programmes. It had licensed two United States television programmes to F on a "run of series" basis which meant that F as licensee would acquire rights and pay for them as long as the shows were broadcast nationally in the US. Clause 4(a) of the licence agreement provided that each episode of each licensed season of the programmes would be similar in content and overall production value to the episodes in the 1997/98 US broadcast season. A rider to the agreement permitted F to make minor cuts in the programmes to conform to its broadcasting policy and provided that where, even with such cuts, an episode could not be broadcast U would provide a substitute film or if no substitute was available the number of episodes and licence fee paid by F would be reduced. At the end of 2002 F purported to dissolve the agreement under Dutch law, which governed the agreement, on the ground that the contents of the programmes had significantly changed over the years. The judge held that the large difference in the number of episodes that were non-compliant, untransmissible or available only for restricted viewing led to the conclusion that the content of the 2001/02 episodes did not conform in terms of content to those of the 1997/98 season. F submitted that anything in an episode was part of its content, that the totality of the content of an episode of the 2001/02 series had to be compared with the totality of the content of all the episodes of the 1997/98 series, and that the judge had been entitled to conclude that the facts alleged if established at trial would show that a large number of the episodes of the 2001/02 series were not "similar in content" to the episodes in the 1997/98 series and that F was accordingly entitled to dissolve the 1998 agreement. U submitted that the words "similar in content" only meant that the programme would remain the same type of programme and that clause 4(a) was to be interpreted so as not to extend to any aspect of any episode that impinged on compliance with the programme code of the Independent Television Commission (ITC).
(1) The word "content" in relation to an episode of a television series naturally meant everything that was in the episode. Similarity of content was a question of inference from primary facts. There was no express or implied obligation on U to ensure that episodes supplied under the agreement complied with the ITC code but that did not mean that the fact that there had been a substantial increase in the proportion of non-compliant and therefore untransmissible episodes could not be relied on as evidence of dissimilarity of content that would be a breach of clause 4(a). (2) The parties had intended a broad comparator against which each of the episodes delivered under the agreement could be assessed. The episodes were not to be the same but merely similar, which required an evaluation of content, which was a question of fact and degree. Each episode of the 2001/02 season had to be taken by way of comparison with the general run of episodes in the 1997/98 season and not with the worst of such episodes. The claim that there had been a breach of clause 4(a) did not fail at the outset because some 1997/98 episodes were non-compliant. (3) The judge had approached the issues of infringement of clause 4(a) and of F's right to terminate on the correct basis as a matter of law. (4) The judge had been wrong on the assumed facts to conclude that F had been entitled to dissolve or determine the agreement because numerous episodes of the 2001/02 series breached clause 4(a). The issues of dissimilarity and sufficient justification for termination could only be determined at trial and the judge's decision would only be right if all the facts alleged and no others were established. The judge should have refused to determine those issues. (5) The fact that an episode was untransmissible under the ITC code for the purposes of the rider to the agreement did not prevent that episode from founding the basis of a claim for infringement of clause 4(a). (6) A substitute episode under the rider had to be new episode and not a repeat.
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