National Rugby League CEO David Gallop Gallop was recently a guest lecturer at the University of Technology. The topic: Sport and the Law. Lightbulb imagines Gallop wouldn’t have been stuck for things to talk about.

The NRL is currently in the middle of a difficult legal stoush involving its major sponsor and pay TV broadcaster. We’ve been watching the story unfold with interest, especially given rights over new media lie at the core of the dispute.

 
Reducing the facts to their simplest form, the nightmare for the NRL has played out as follows:

• Telstra obtains exclusive new media rights.  Telstra enters into a A$90 million, six year naming rights sponsorship agreement with the NRL. Part of the deal is the grant to Telstra of an exclusive copyright licence for specific broadcast rights of NRL game footage on the internet and mobile phones.
• Fox Sports broadcasts NRL games through new media anyway. The number of entities involved and their cross-ownership is complex. Simply stated, Fox Sports (the pay TV broadcaster of NRL games) broadcasts highlights on its website, and also supplies footage to other mobile phone broadcasters.
• Telstra commences court proceedings against Fox Sports. Telstra argues Fox Sports is breaching its exclusive licence. The NRL joins the side of Telstra. Fox Sports argues its broadcasts fall within the fair dealing exception to copyright infringement which applies to use of copyright material for the purposes of reporting news. In an interlocutory hearing , the court agrees with Fox Sports and refuses to immediately intervene, meaning a full hearing may result later in the year.
• NRL sues Telstra. Meanwhile, Telstra withholds payment of sponsorship monies as promised to the NRL in paragraph 1 above. In response the NRL commences proceedings in the Supreme Court of NSW.

To use a rugby league analogy, we’ve only seen the opening kick-off and first few sets. An interlocutory relief application such as the one made by Telstra does not require a thorough dissemination of all the factual and legal issues. The court declined to step on this occasion.

The relationships

The NRL is half owned by News Ltd, which also half owns Fox Sports, the pay TV broadcaster of NRL games. PBL (which owns Channel Nine, the free to air broadcaster) owns the other half of Fox Sports, the Pay TV channel that airs on Foxtel . Both companies also have a 25% stake in Foxtel itself - the other 50% stake being owned by... Telstra, who signed a sponsorship deal and new media broadcast rights deal with the NRL in 2007. Commentators have called the relationships very fragile and incestuous.

Telstra's rights licence contract

From these opening minutes of the game though, we can see that Telstra is looking decidedly shaky against a solid Fox Sports argument. Telstra has telling flaws in its attack, such as this pesky clause in its licence contract:

Nothing in this agreement limits or affects Telstra’s rights or the rights of any other person to communicate or disseminate the NRL Matches or any other NRL Content in accordance with any statutory or common law rights including, without limitation, fair dealing rights under the Copyright Act 1968 (Cth). [emphasis ours]

Telstra's email 

Additionally in a cruel twist of fate Telstra’s own prior recognition of acceptable fair dealing for reporting of news, sent in negotiations over AFL new media rights, was thrown back at it through an email sent by Telstra to the AFL in December 2005, as read by the court: “…the fair dealing – that Telstra would recognise, others would take, thereby undermining the utility of any grant, would be one minute per quarter and two minutes "at end of game.” [emphasis ours].

That’s exactly the length of the highlights package Telstra is trying to prevent Fox Sports from showing. In fact, they’re trying to restrict Fox Sports to no more than 45 seconds per game. Telstra’s comeback to the above was that a lot has changed since December 2005.

Telstra's legal argument 

Indeed, it seems change would neatly summarise Telstra’s argument. It is seeking to change the approach to fair dealing interpretation to suit changing technology and a changing media consumption environment. The court summarised the thrust of Telstra’s argument as follows:

“…[Telstra] submitted that the sophisticated state of the allocation of media rights, and the unique circumstances of the availability of continuous on-demand content on the internet, mean that "old world" accommodations about the use of copyright material by rival television broadcasters do not constitute an appropriate approach to the question of fair dealing in the so-called digital age.”

Our view and practical takeaways

It is unclear whether Telstra will be able to use this argument to overcome established interpretations of fair dealing and copyright law. Media reports suggest the NRL is actively pursuing a settlement between the parties and talks are proceeding. If the case is settled we may never hear these issues thrashed out to a conclusion in court.

Arguably, the NRL’s situation is unique given the complex and inter-related arrangement of its key stakeholders. For the rest of us, the lesson is that the friction between digital media and copyright law and practice is ever increasing. Licensors of content should use carefully drafted contractual mechanisms to clearly distinguish and segment their new media rights to maximise their potential and secure their positions. The anticipated effect of copyright law, in particular the fair dealing exceptions, must be carefully considered by content licensees and factored into any licensing strategy.

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Further reading - on new media and entertainment law, IPTV, Internet TV and television broadcasting: 

• Description of our services - Entertainment, Print & Audio-Visual Media
• Copyright traps for television formats
• Barry Diller on media and corporate governance
• Viacom to YouTube: "I want my MTV" and YouTube's IP revenue sharing model
• New media market definition for trade practices regulation
• SMS revenue models and e-marketing legal compliance
• Content licensing for mobile commerce