CJEU on communication to the public and national systems of collective rights management

Author: Eleonora Rosati (e-LAWnora—Copyright Law & Policy Consultancy)

Case C-351/12 Ochranný svaz autorský (OSA) pro práva k dílům hudebním o.s. v Léčebné lázně Mariánské Lázně a.s. (not yet published), 27 February 2014

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu096, first published online: May 22, 2014

In this ruling the Court of Justice of the European Union held that TV and radio transmissions in spa guest rooms fall within the scope of the right of communication to the public, and that EU law does (or rather, did) not preclude per se national legislation that reserves the exercise of collective management of copyright and related rights in the territory of a certain Member State to a single copyright collecting society.

Legal context

This reference for a preliminary ruling from the Czech Republic concerned the following issues: (1) whether communication of protected works by a spa establishment through the intentional distribution of a signal by means of TV or radio sets in the bedrooms of its guests constitutes a communication to the public within the meaning of Article 3(1) of Directive 2001/29 (the ‘InfoSoc Directive’); (2) whether national legislations that exclude the right of authors to authorize or prohibit the communication of their works by a spa establishment, ie a business, through the intentional distribution of a signal by means of television or radio sets in the bedrooms of the establishment's guests are compliant with the InfoSoc Directive; (3) whether EU law—notably Article 16 of Directive 2006/123 and Articles 56 and/or 102 of the Treaty on the Functioning of the European Union—precludes national laws that reserve the exercise of collective management of copyright and related rights in the territory of a certain Member State to a single copyright collecting society, thus preventing users of works to choose a collecting society from another EU Member State.

Facts

Ochranný svaz autorský (OSA) is an authorized musical works copyright collecting agency in the Czech Republic. It also acts on behalf of other collecting agencies established in both the Czech Republic and a number of other Member States. Litigation ensued when a local health spa refused to pay the fees claimed by OSA in respect of works that the spa broadcast in its guest rooms by means of TV and radio sets. Among other things, the spa's refusal was based on the grounds that OSA had abused its monopoly position in the Czech Republic by charging fees that were higher than those charged in other Member States. The Plzeň Regional Court decided to stay the proceedings and seek guidance from the Court of Justice of the European Union (CJEU).

Analysis

After observing that the principal objective of the InfoSoc Directive is to provide a high level of protection of authors, the CJEU reviewed earlier case law on communication to the public. It concluded that communication of protected works by a spa establishment through the intentional distribution of a signal by means of television or radio sets in the bedrooms of its patients falls within the scope of Article 3(1) of the InfoSoc Directive.

The Court then held that the exhaustive nature of the Article 5 list of exceptions and limitations precludes national legislation that excludes the right of authors to authorize or prohibit the communication of their works by a spa establishment, ie a business, through the intentional distribution of a signal by means of TV or radio sets in the bedrooms of its guests.

Finally, the CJEU considered whether national monopolies for the collective management of copyright and related rights are compatible with EU law. Among other things, the court held that, although legislation of this kind constitutes a restriction on the freedom to provide services, such restriction may be justified to protect IP rights. Further, legislation of this kind also permits the effective management of rights and an effective supervision of their respect in a given territory by means of reciprocal representation agreements. Overall, the court believed that, as EU law stood at the time of this reference, there was no other method that would allow the same level of protection as territory-based protection and territory-based supervision of copyright and related rights.

Practical significance

The CJEU decision further clarifies the scope of the right of communication to the public under Article 3(1) of the InfoSoc Directive. This has been at the centre of numerous references for a preliminary ruling in recent times. It is sufficient to recall the decisions in Case C-466/12 Nils Svensson and Others v Retriever Sverige AB, 13 February 2014; Case C-607/11 ITV Broadcasting and Others v TVCatchup Ltd, 7 March 2013; Case C-135/10 SCF v Del Corso, 15 March 2012; and Case C-162/10 Phonographic Performance (Ireland) Ltd v Ireland and Attorney General, 15 March 2012.

The most interesting part of the judgment, however, concerns collective management of rights. Although the court upheld the validity of laws like the Czech law in respect of EU law, this judgment per se does neither invalidate earlier decisions, such as that of the General Court in Case T-442/08 International Confederation of Societies of Authors and Composers (CISAC) v European Commission, 12 April 2013 (although in her Opinion, Advocate General Sharpston somehow re-assessed—if not scaled down—the overall relevance of the decision), nor prevent the emergence of new legislative solutions that would allow for more effective collective management.

Following the vote of the European Parliament, the Council formally adopted Directive 2014/26 of the European Parliament and of the Council of 26 February 2014 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market (the ‘CRM Directive’). Member States have until 10 April 2016 to transpose this directive into their national laws. This new piece of EU legislation sets requirements that are necessary to ensure the proper functioning of the management of copyright and related rights by collective management organizations. To this end, it intends to increase the transparency and efficiency of these organizations. The directive also provides for multi-territorial licensing by collective management organizations of authors′ rights in musical works for online uses.

Article 5 of the CRM Directive imposes on Member States an obligation to ensure that right holders have a number of rights, including the right ‘to authorise a collective management organisation of their choice to manage the rights, categories of rights or types of works and other subject-matter of their choice, for the territories of their choice, irrespective of the Member State of nationality, residence or establishment of either the collective management organisation or the rightholder.’ This means that national legislation like the Czech law at stake in OSA will be no longer allowed under EU law once the deadline for the national implementations of the CRM Directive has passed. Thus, while the CJEU decision might have saved the legitimacy and position of traditional collecting societies that operate in a monopoly regime granted by national laws, this scenario is bound to be short-lived.

Copyright law trumps free movement of unlawfully distributed goods

Author: Thorsten Lauterbach (Robert Gordon University Aberdeen)

Case C-5/11 Titus Alexander Jochen Donner, Court of Justice of the European Union, 21 June 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps177, first published online: November 29, 2012

Traders who target customers in a specific European Union Member State for unlawful sales of copyright works can face criminal prosecution in that jurisdiction even if the goods in question are not protected by copyright law in the country of origin; such traders cannot rely of the general principle of the free movement of goods.

Legal context

This case concerns a clash of differing national copyright laws between European Union (EU) Member States with the overarching EU notion of free movement of goods. The latter is manifested by Article 34 of the Treaty on the functioning if the European Union (TFEU) which prohibits quantitative restrictions on imports and all measures having equivalent effects. However, Article 36 TFEU offers a number of exceptions to this prohibition. Of key importance for this case is the protection of industrial and commercial property, which includes copyright law, as a justification for barriers to intra-EU trade.

German law renders the distribution of unlawful copies of protected copyright works a criminal offence, implementing Article 4(1) of Directive 2001/29 on copyright in the information society (the ‘InfoSoc Directive’). That article concerns the right of owners of copyright works to exclusively control their distribution to the public. While the goods in question did not enjoy copyright protection in the country of origin at the time, they did so in Germany. Did German copyright law constitute an illegal barrier to intra-EU trade, or was it lawful courtesy of Article 36 TFEU?

Facts

An Italian company, Dimensione, sold replicas of Bauhaus-style furniture of well-known designers, with some of its targeted customer base being located in Germany. Dimensione used marketing materials tailored and aimed at the German market. Donner operated a transport business which would collect the sold items in Italy and deliver them to the German purchasers. While at the time of the sales the replicas did not benefit from copyright protection under Italian copyright law, they did so under German copyright law. There was an argument that although the contracts were completed in Italy, the German customers would only have possession of the goods when they were delivered to them. This, in turn, meant that the replicas were distributed to (the German) public under Article 4(1) of the InfoSoc directive without the permission of the owners of the copyright. The key issue in the German courts was whether Donner's acts constituted aiding and abetting an act of copyright infringement under ss 17, 106 and 108a UrhG (Author's Rights Act) and §27 StGB (Criminal Code). Under German law, goods are distributed when the property is actually transferred to the public and the seller can no longer legally dispose of them. While Donner argued that this transfer had been completed in Italy when he paid for the goods there and then on behalf of the German customers, the Landgericht (Regional Court) Munich II opined that the actual transfer occurred when the goods were delivered to the German customers (and they reimbursed him for the price of the goods and cost of freight). This, in turn, made German law applicable and the Munich court duly convicted Donner.

Donner appealed to the Bundesgerichtshof (Federal Court of Justice), arguing that his conviction, inter alia, contravened the EU's free movement of goods principles, as German copyright law had been used to an artificial partitioning the Single Market. The court asked the European Court of Justice (ECJ) for a preliminary ruling on the following questions: Are Articles 34 and 36 TFEU governing the free movement of goods to be interpreted as precluding the criminal offence of aiding and abetting the prohibited distribution of copyright-protected works resulting from the application of national criminal law where, on a cross-border sale of a work that is copyright protected in Germany,

• that work is taken to Germany from a Member State of the European Union and de facto power of disposal thereof is transferred in Germany,

• but the transfer of ownership took place in the other Member State in which copyright protection for the work did not exist or was unenforceable as against third parties?

Figure 1: E1027 table by Eileen Gray, an example of the type of goods subject to the dispute (Source: courtesy of steelform.com, used with permission. Clubmarx 19:24, 24 November 2004 (UTC))

Figure 2: Barcelona Chair by Ludwig Mies van der Rohe, an example of the type of goods subject to the dispute (courtesy of Sailko (author) under Creative Commons Licence 3.0)

Analysis

Interpreting Article 4(1) of the InfoSoc Directive broadly, the ECJ held that ‘distribution to the public’ could be constituted by various activities, rather than one particular type of act. The whole range from concluding the contract to the delivery of goods to customers would be within the ambit. Consequently, the exclusive distribution right could be infringed in different Member States by cross-border sales. If there is evidence that a trader specifically targets customers in a particular Member State, this would constitute ‘distribution to the public’. If a trader set up websites using specific languages, design and distribution of advertising materials and the provision of tailored delivery and payment systems are all relevant in the court's assessment on a case-by-case basis. In respect of traders such as Donner, a national court would have to be satisfied that they themselves were involved in the targeting of the public and whether they were aware of the activities by the actual seller.

The ECJ agreed that there was a potential conflict between the national legislation and the free movement of goods principle anchored in Article 34 TFEU: clearly, an offence of aiding and abetting the distribution of goods protected by copyright constituted a restriction of the free movement of goods. While this contravened Article 34 TFEU, it was possible to justify this restriction under Article 36 TFEU. The ECJ argued that where goods were placed on the market because of differences between national copyright laws, bypassing the permission of the right-holder, national law could be used to restrict the free movement of goods. Consequently, the free movement principle would not trump an offence of aiding and abetting unlawful distribution of goods protected by copyright anchored in national law.

Practical significance

In view of previous ECJ rulings, the outcome in this case may be unsurprising. It is nevertheless significant, not least for businesses which trade in goods that attract copyright protection. If they embark on cross-border trade, there is a need to take account of the copyright laws of other Member States. The Advocate-General had remarked—and the ECJ agreed—that the requesting of consent from the respective copyright owners would have been the prudent step to take before embarking on the particular business venture. Viewed in this light, the approach taken by German copyright law could not be regarded as disproportionately restricting intra-EU trade. On a policy level, it is unclear whether this decision will lead the European Commission to consider further attempts at harmonizing further areas of copyright law where national levels of protection differ between Member States. There are prominent examples where previous rulings had led to European copyright legislation in the early 1990s: Case 62/79 Coditel v Cine Vog (Satellite and Cable Directive), Case 158/86 Warner Bros v Christansen (Rental Rights Directive) and Case 341/87 EMI Electrola v Patricia (Term of Protection Directive). In all of those celebrated instances, it was argued that the differences in copyright protection between Member States hindered the completion of the Single Market programme. In copyright and authors' rights terms, there is still a very long way to go before that objective is attained.

There is a recurring argument that ever-increasing cross-border business and consumer activity via the internet and other communications technology require a wider and conceptually based, less piecemeal, approach to harmonization of national copyright laws for the benefit of all stakeholders. Disputes such as Donner may be quite detrimental to both consumer and business confidence in intra-EU trade, besides painting an unclear picture for owners and authors of copyright works. The recent Commission proposal for a directive on ‘collective management of copyright and multi-territorial licensing of rights in musical works for online uses in the internal market’ may only be the first sign of things to come. Given that a more holistic approach to harmonization of copyright law, while desirable, may be illusory, a high number of smaller steps towards that aim are most likely.

The dental surgery, the hotel bedroom and ‘communication to the public’

Author: Alex Freelove and Joel Smith (Herbert Smith LLP, London)

Società Consortile Fonografici (SCF) v Marco Del Corso (Case C-135/10) and Phonographic Performance (Ireland) Ltd v Ireland and another (Case C-162/10), Court of Justice of the European Union (ECJ), 15 March 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps100, first published online: July 23, 2012

The ECJ has ruled in two cases on the meaning of ‘communication to the public’, finding that the free broadcasting of phonograms as background music in a private dental practice was not a ‘communication to the public’, but that the broadcasting of phonograms in a hotel bedroom was.

Legal context

The ECJ handed down judgment on the same day in relation to two cases, which required the ECJ to discuss the concept of ‘communication to the public’. The concept of ‘communication to the public’ appears not only in Article 8(2) of the Rental Directive (Directive 92/100), which provides for users of commercial phonograms to pay remuneration when they communicate them to the public, but also in Article 3(1) of the Copyright Directive (Directive 2001/29), which provides authors with the exclusive right to authorize or prohibit any communication to the public of their works.

The ECJ highlighted that the concept of ‘communication to the public’ in these two provisions is used in differing contexts and pursues objectives which, while similar, are different to some extent: Article 8(2) of Rental Directive is compensatory in nature, whereas Article 3(1) of the Copyright Directive is preventative in nature.

Facts

Società Consortile Fonografici v Marco Del Corso

This case was referred to the ECJ by the Turin Court of Appeal, Italy, following a dispute between a royalty collection agency for phonogram producers, Società Consortile Fonografici (‘SCF’), and Mr Del Corso, the owner of a private dental practice in which background music was played whilst patients were being treated.

SCF brought proceedings against Mr Del Corso seeking a declaration that his playing of background music constituted a ‘communication to the public’ of phonograms for the purposes of Article 8(2) of the Rental Directive and that therefore this activity required a royalty to be paid to SCF for distribution to its members.

Phonographic Performance (Ireland) Limited v Ireland and another

Phonographic Performance (Ireland) Limited (‘PPL’) is a collecting society which represents the rights which phonogram producers hold over sound recordings or phonograms in Ireland. PPL brought an action against Ireland seeking a declaration that Ireland had acted in breach of Union law in exempting hotel operators from the obligation to pay equitable remuneration for the use of phonograms in hotel bedrooms in Ireland.

The Irish High Court referred several questions, which required the ECJ to consider the concept of ‘communication to the public’ in relation to Article 8(2) of the Rental Directive in relation to sound recordings and phonograms heard by guests in hotel bedrooms.

Analysis

Società Consortile Fonografici v Marco Del Corso

As mentioned above, the ECJ highlighted that the concept of ‘communication to the public’ in Article 8(2) of the Rental Directive and in Article 3(1) of the Copyright Directive is used in differing contexts and pursues objectives which, while similar, are different to some extent.

Even though the reference from the Turin Court of Appeal related to Article 8(2) of the Rental Directive, the ECJ relied on recent ECJ judgments on Article 3(1) of the Copyright Directive to highlight relevant criteria in the assessment of whether a communication to the public has taken place:

• The indispensable role of the ‘user’: in light of ECJ judgments in SGAE v Rafael Hoteles (Case C-306/05) and FAPL v QC Leisure (Case C-403/08), the ECJ established that the operator of a hotel or public house makes a communication to the public within the meaning of Article 3(1) of the Copyright Directive when it intervenes, in full knowledge of the consequences of its action, to give access to a broadcast containing the protected work to its customers.
• The concept of ‘public’: the term ‘public’ (a) refers to an indeterminate number of potential listeners and (b) implies a fairly large number of persons. The ECJ suggested that the concept of ‘public’ encompasses a certain de minimis threshold, which excludes groups of persons which are too small or insignificant. In determining such a threshold, it is relevant not only to know how many persons have access to the same work at the same time, but also it is also necessary to know how many of them have access to it in succession.
• The profit-making nature of the communication: as the ECJ had previously held in FAPL v QC Leisure, this was a relevant consideration in determining whether a ‘communication’ had taken place. It is not enough for the communication to ‘catch’ the public by chance, the public must be both targeted by the user, and receptive to that communication.

In light of these criteria, the ECJ found that a dentist who broadcasts phonograms, free of charge, in dental practices for the benefit of his patients and enjoyed by them without any active choice on their part is not making a ‘communication to the public’. Such broadcasts did not therefore entitle the phonogram producers to the payment of remuneration.

Phonographic Performance (Ireland) Limited v Ireland and another

As seen in the ECJ's approach in SCF v Del Corso, even though reference from the Irish High Court related to the Rental Directive, the ECJ relied on its previous judgments that were based on Article 3(1) of the Copyright Directive in reaching its decision.

The ECJ referred to the criteria highlighted in SCF v Del Corso (above) and held that whether a hotel operator provided guest bedrooms with (a) televisions and/or radios to which it distributes a broadcast signal or (b) apparatus other than a television or radio and phonograms in a physical or digital format capable of being broadcast or heard by means of that apparatus, the hotel operator, in each case, was a ‘user’ making a ‘communication to the public’ of a phonogram.

The hotel operator was therefore obliged to pay ‘equitable remuneration’ under Article 8(2) of the Rental Directive for the transmission of those phonograms.

Practical significance

The ECJ handed down judgment on two cases brought by collecting societies representing phonogram producers that sought to collect equitable remuneration for the playing of phonograms. Whilst the playing of background music in a dental surgery was found not to be a communication to the public, the provision of televisions and/or radios to which a hotel operator distributes a broadcast signal was.

These cases, the latest in which the ECJ has discussed the concept of ‘communication to the public’ following the ECJ's decision in FAPL v QC Leisure in October 2011, show that ‘communication to the public’ should be construed broadly and that the courts are robust in finding that copyright infringement is established where a business is exploiting the work by communicating it to a number of people.