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The Federal Court (Bennett J) has held that each of the payments totalling $97,742,609, made by the taxpayer to the International Olympic Committee (IOC), for the "ITVR Signal" which the taxpayer used in connection with its broadcast of the 2006 Winter Olympic Games and the 2008 Olympic Games, was not a "royalty" within the meaning of paragraph 3 of Article 12 of the Double Tax Agreement between Australia and Switzerland.

The ITVR signal was described as "electromotive forces" that were transmitted via a copper cable to a receiving device. There was no picture, image or sound recorded or permanently stored in the copper cable that transmitted the signal. This was because the signal did not exist in isolation within a cable. If the cable was disconnected from its signal source, such as a camera, microphone or other device, there would be no signal left in the cable. The Federal Court therefore held that there was no copyright in the signal, because nothing was "embodied" in anything as required by the Copyright Act 1968.

The Federal Court said, at para 124:

"From the definition in s 10(1) [of the Copyright Act 1968], and accepting that the signal is an article or thing, is the aggregate of the visual images embodied in the signal so as to be capable by the use of the signal of being shown as a moving picture? As a matter of technology, there is no time when the aggregate of visual images is present in the ITVR Signal. Further, the word is “embodied”; it is not “pass through”. There is no image or sound recorded in the signal and there is no physical form to an image or sound. Even if there is no requirement for a physical form, the language of s 24 is in terms of the sounds or visual images being capable of being reproduced. Here, there is no capacity for reproduction from the ITVR Signal. What the other device, the receiving device, does is produce the sounds and visual images from the data stream."

For this and other reasons, the Court held that the taxpayer was not required to withhold any amount from the payments made to the IOC under s 12-280 of Schedule 1 to the Taxation Administration Act 1953.

Seven Network Limited v FCT [2014] FCA 1411 (Federal Court, Bennett J, 22 December 2014).


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