Radio stations may exclude production costs from advertising revenues

R
ADIOSTATIONSMAYEXCLUDEPRODUCTIONCOSTSFROMADVERTISING
REVENUES

LAURENTCARRIÈREANDIANAALEXOVA*
LEGERROBICRICHARD,
LLP
L
AWYERS,ANDPATENTANDTRADE-MARKAGENTS
PRECIS:TheFederalCourthasheldthataradiostationthatproducesand
broadcastsanadvertisementforaclientispermittedtoexcludethefairmarketvalue
oftheproductionservicesfurnishedtoadvertisersfromtherevenuesgeneratedfrom
thebroadcastofadvertisementstowhichtheservicesrelateandonwhichroyalties
havetobepaid.
InAstralMediaRadioIncvSocietyofComposers[2008FC1198]theFederal
Courtheldthataradiostationthatproducesandbroadcastsanadvertisementfora
clientispermittedtoexcludethefairmarketvalueoftheproductionservices
furnishedtoadvertisersfromtherevenuesgeneratedfromthebroadcastof
advertisementstowhichtheservicesrelateandonwhichroyaltieshavetobepaid.
Theplaintiffsareradiobroadcastersoperatingunderlicenceswhichrequirethemto
payroyalties.Theysubmittedthattheincomebaseusedtodeterminetheroyalties
shouldnotcomprisetheexpensesofanyproductionservicesprovidedto
advertisers.
TheSocietyofComposers,AuthorsandPublishersofCanada(SOCAN)andthe
NeighbouringRightsCollectiveofCanada(NRCC)grantlicencesandcollect
royaltiesforthebenefitofmusiccomposersandpublishersandmusicperformers
andsoundrecordingowners,respectively.InaccordancewithSection67.1ofthe
CopyrightAct,SOCANandNRCCfileproposedtariffsregardingthepayable
royalties,whicharepreviouslyapprovedbytheCopyrightBoardofCanada.The
tariffsinquestionarebasedontheRegulationsdefiningAdvertisingRevenues.
Thedefendantsquestionedthecourt’sjurisdictionandclaimedthatnosuch
exclusionsofaradiostation’sproductioncostsweretobemade.Theysought
declaratoryreliefinordertointerprettheregulationscorrectly.

©CIPS,2008.*Lawyerandtrade-markagent,LaurentCarrière,isaseniorpartnerwithLEGERROBICRICHARD,
LLP
amultidisciplinaryfirmoflawyers,andpatentandtrademarkagents.IanaAlexovaisanarticling
studentwiththefirm.Publishedinthe2008-12-04issueofWorldMediaLawReport.Publication
328.056.

2
Thecourtstatedthatithadtheproperjurisdictionregardingtheactioninquestion
andthattheplaintiffshadstandingtobringtheactionsince:

therewasanissueastotheappropriatemeaningoftheterm‘advertising
revenues’appearingintheregulations;and

theyweredirectlyaffectedandthereforehadaninterestastoitscorrect
interpretation.
Thecourtalsomentionedthataradiostationshouldnotbetreatedinadifferent
mannertoanadvertisingagencywhenprovidingidenticalservices,sincethiswould
resultinillogicalandinequitableoutcomes.Infact,ifthedefendants’interpretation
wasretained,aradiostationthatinvoicesseparatelywouldenduppayingalower
tariffthanonewhichdoesnot,fortheprovisionofthesameservices.
Inaddition,JusticeZinnwasoftheopinionthattheinterpretationoftheregulations
shouldtakeintoaccountthatthetariffsexisttosecureanequitableremuneration
andshouldnotdistorttheminawaythatwouldfavoureitherradiobroadcastersor
copyrightowners.

3
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