The ruling could have a chilling effect on recordings of classical music in Britain, and will force Hyperion to sharply reduce its output, the independent label said in a statement.
The dispute dates to 2001, when Hyperion recorded a CD of the music of French Baroque composer Michel-Richard de Lalande. The recording, which featured the Ex Cathedra choir, made use of a performing edition of Lalande's music prepared by musicologist Lionel Sawkins.
In an apparently unprecedented move, Sawkins demanded royalties from the label, claiming that the intense research involved in creating the edition entitled him to the same rights as the author of a work. Hyperion agreed to pay a "hire fee" for the use of Sawkins' version, but refused to pay royalties, arguing that "an edition of existing musical work that is a faithful reproduction of Lalande's music cannot itself be an original music work."
After attempts at a negotiated settlement, Sawkins took Hyperion to court. After a six-day trial in May 2004, a judge ruled that all but one of the works on the CD involved a large enough contribution on Sawkins' part to entitle him to royalties.
The court of appeal has now upheld that decision. Lord Justice Mummery, writing for the court, held that "the effort, skill, and time which the judge found Dr. Sawkins spent in making the three performing editions were sufficient to satisfy the requirement that they should be 'original' works in the copyright sense."
Damages in the case have not yet been determined. According to Hyperion, the royalties themselves are not likely to be high, but Sawkins' lawyers are expected to attempt to recover legal fees of up to Ô£1 million.
"Hyperion now is forced to reconsider its general recorded output and will be reducing dramatically its commitment to many new recordings over the next year or two to concentrate on fund-raising activities to help with the legal costs and to keep a limited number of new recordings in its diary," the label's statement read.
Founded in 1980, Hyperion issues about 80 CDs a year of music from the 12th through the 20th century. Artists who have recently appeared on the label's releases include pianists Stephen Hough and Marc-Andr_ Hamelin, conductor Charles Mackerras, and soprano Felicity Lott.