The hospitality industry has won a High Court appeal that could save pubs, hotels and restaurants millions of pounds in fees for playing background music.

The case relates to an appeal in January 2005, made in response to a fee hike of 200 to 400 per cent by Phonographic Performance Limited (PPL) – which sets, administers and collects the fees. The industry estimates that as a consequence of the increase the average pub and restaurant has paid an additional £500-£600 – a total of £12m.

The British Beer and Pub Association (BBPA) and the British Hospitality Association (BHA) led the appeal for the industry, arguing that PPL had failed to follow the correct process for setting the fees increase and believed it to be "unreasonable and disproportionate". The appeal goes against a decision made by the Copyright Tribunal, which proposed the re-introduction of the previous tariffs for those businesses not using broadcast music and requested PPL submit a new tariff for broadcast music only.

The judge, Mr Justice Kitchen, stated that this would be "inconvenient, cumbersome, expensive and involve a waste of judicial and public resources." He also ruled it to be a misinterpretation of the Copyright, Designs and Patents Act 1988, which sets the value of both broadcast and non-broadcast music in one tariff. BBPA chief executive, Rob Hayward, said: "This is a victory for common sense in an extremely complex area of law. We now look forward to going back to the Copyright Tribunal, where we will do our utmost to secure a reduction in the fees which will give much needed financial relief to those licensees who are currently paying PPL well over the odds for music in their pubs."

Bob Cotton, BHA chief executive, said: "This raises the real prospects of reverting the charges for the playing of background music to a much more sensible and sustainable level."