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European Court of Justice Defines Parody

by Marie-Andrée Weiss

On September 3, the European Court of Justice (ECJ) published its judgment in the Deckmyn v. Vandersteen case, C-201/13 where it defined what a parody is under European Union (EU) law. The ECJ also stated that copyright holders have a “legitimate interest” to ensure that their work is not associated with a discriminatory parody, but stopped short at giving copyright holders an absolute right to strike down discriminatory parodies.

The ECJ had been asked by the Brussels Court of Appeals for a preliminary ruling in the interpretation of article 5.3(k) of Directive 2001/29/EC on the harmonization of certain aspects of copyright and related rights in the information society (the “Information Society Directive“), which gives Member States the option to provide an exception to copyright infringement if the infringing work has been used “for the purpose of caricature, parody or pastiche.”

In that case, the heirs of Willebrod Vandersteen, the author of the Suske en Wiske comic books, and the holders of the intellectual property rights associated with these works, had sued Johan Deckmyn and the Vrijheisfonds VZW, a non-profit association which sole purpose is to support financially the Belgium nationalist political party Vlaams Belang, to which Deckmyn belongs. Deckmyn had distributed in January 2011 a calendar inspired by a cover of the Suske en Wiske’s album ‘De Wilde Weldoener’ (The Compulsive Benefactor) at a New Year reception in Ghent. While the cover of the original album showed a middle-aged man wearing a bowler hat, business shoes and a toga, throwing coins at people while flying in the air, the calendar showed a caricature of the mayor of Ghent, wearing a toga and the black, yellow and red belt which is the attribute of mayors in Belgium, flying in the air while distributing money to “people wearing veils and people of colour” (at 9).

The heirs sued for copyright infringement and won in the court of first instance. Defendants appealed and raised a parody defense under point (6) of Article 22(1) of the June 30, 1994 Belgium copyright law, asserting that a parody must be itself original, and that it must be humorous and seeking to ridicule the original work. The heirs disputed that definition of a parody. In order to decide the case, the Brussels Court of Appeals asked several preliminary questions to the ECJ. It asked whether a parody is an autonomous concept of European Union law, and also asked if a parody must be original, if a parody must be such that it cannot be reasonably attributed to the author of the original work, if a parody must seek to be humorous, whether it must mock the original work or not, and finally if a parody must mention the source of the parodied work.

The concept of parody is an autonomous concept of EU law

Pedro Cruz Villalón, Advocate General (AG) of the ECJ, published his opinion on the case on may 22, 2014. An AG publishes an opinion to guide the ECJ, but the court is not obliged to follow it. In AG Villalón’s opinion, parody is an autonomous concept of the EU law. The ECJ followed its AG’s opinion and held that the concept of parody is indeed an autonomous concept of EU law. As such, it must be interpreted uniformly throughout the European Union.

What is a Parody?

However, the Information Society Directive does not define what is a parody. Therefore, the meaning and scope of this legal concept “must be determined by considering its usual meaning in every day language, while also taking into account the context in which it occurs and the purposes of the rules of which it is part” (paragraph 19).

In his Opinion, AG Villalón undertook to define what is a parody. It quoted the definition of parody given by dictionaries in several languages, among them the definition provided by the Shorter Oxford English Dictionary, «A prose, verse or (occas[ionally]) other artistic composition in which the characteristic themes and the style of a particular work, author, etc. are exaggerated or applied to an inappropriate subject, esp[ecially] for the purposes of ridicule (…)»  AG Villalón explained that parody is “in its most summary statement structurally an “imitation” and functionally “burlesque“” (AG Opinion, at 48).

The ECJ provided a somewhat different definition of a parody, as it stated that a parody’s essential characteristics are (1) “to evoke an existing work, while being noticeably different from it” and (2) “to constitute an expression of humour and mockery.” The parody, however, does not have to display an original character of its own, but it must display “noticeable differences” with the original work, and “it could reasonably be attributed to a person other than the author of the original work itself; that it should relate to the original work itself or mention the source of the parodies work” (at 33).

Parody and Freedom of Expression

The right to parody is, however, not absolute. The ECJ noted that, in this case, the parody conveyed a discriminatory message, and that the EU has adopted the principle of non-discrimination based on race, color, or ethnic origin, as defined by the Council Directive 2000/43/EC of June 29, 2000. As such, copyrights holders have “a legitimate interest in ensuring that the work protected by copyright is not associated with such a [discriminatory] message” (at 31). AG Villalón had asked in his opinion “[t]o what extent the interpretation by the civil courts of the scope of the parody exception may be conditioned by fundamental rights?” (Opinion at 76). He concluded that if the message conveyed by the parody is “radically contrary to the deepest convictions of society,” then the parody exception to copyright infringement should not apply. For AG Villalón, the Member States would have to determine, on a case to case basis, if a particular parody reaches this extreme level.

But the ECJ did not go as far, merely stating that the courts must balance the rights of the copyright owners with the right of freedom of expression of the parodist, and to do so, must take all the circumstances of the case into account to preserve such fair balance, without adding that the threshold would be whether a particular parody is “radically contrary to the deepest convictions of society.

U.S. FTC makes Actavis’ acquisition of Forest subject to conditions

By Gabriele Accardo and Aurelia Magdalena Goerner

On 30 June 2014, the U.S. Federal Trade Commission (“FTC”) stated that, in order to address the competition concerns raised by Actavis’s proposed acquisition of Forest Laboratories, it has tentatively accepted the proposed settlement agreement between the FTC’s Bureau of Competition and the two pharmaceutical companies.

In brief, under the proposed settlement agreement, Actavis and Forest agreed to sell or relinquish their rights to four generic pharmaceuticals that treat hypertension, angina, cirrhosis, and prevent seizures.

According to the FTC’s complaint, the effects of the proposed acquisition, as originally proposed, would violate federal antitrust laws insofar as it may substantially lessen competition in the markets for three generic products that treat hypertension, angina and cirrhosis. In particular, the number of suppliers in the markets concerned would be reduced from three to two (for angina) and from four to three (for hypertension and cirrhosis), whereas market concentration would increase substantially post-merger.

Moreover, the proposed transaction would delay the introduction of generic competition against Lamictal ODT, the branded lamotrigine orally disintegrating tablets used to prevent seizures, manufactured by Forest and marketed by GlaxoSmithKline (“GSK”). No companies currently market a generic version in the U.S., whereas Actavis holds the only approved abbreviated new drug application to market generic Lamictal ODT. Thus, absent the proposed acquisition, Actavis is likely to be the first generic entrant and would be the sole competitor to Forest/GSK’s branded Lamictal ODT product for a significant period of time.

In particular, under the proposed settlement agreement, the companies have agreed to relinquish their rights to market generic diltiazem hydrochloride to Valeant Pharmaceuticals International, sell generic ursodiol and generic lamotrigine ODT to Impax Laboratories, and sell generic propranolol hydrochloride to Catalent Pharma Solutions.

The proposed settlement will preserve competition in the markets for these important drugs and is part of the FTC’s ongoing effort to protect U.S. consumers from higher heath care-related costs.

A description of the consent agreement package will be published in the Federal Register by the FTC shortly. Following a public consultation that will last until 30 July 2014, the FTC will decide whether to make the proposed consent order final. A monitoring trustee will then oversee the swift implementation of the consent order.

It may be recalled that last June 2013, the U.S. Supreme Court reversed the eleventh Circuit opinion in the landmark FTC v. Actavis case (see Newsletter 3-4 2013, p. 3 for more background), holding that reverse payment settlement agreements may violate federal antitrust laws but are not a per se violation, thus recognizing the impact that such settlement agreements would have on American consumers in the pharmaceutical market. Yet the validity of such agreements will still be tested under the rule-of-reason. 

Apple settles with U.S. states and consumers in the e-books price fixing case

By Nicole Daniel

According to documents filed in a New York court on 16 June 2014, Apple has reached an agreement in principle with state governments and consumers who filed a class-action lawsuit in the e-books price fixing case where it was alleged that Apple conspired to fix e-book prices.

This comes after District Judge Cote ruled in July 2013 that Apple had conspired with five major book publishers to fix the prices of e-books. They had done so to challenge Amazon’s market power, which was similar to monopoly power. Apple engaged in this anti-competitive behaviour by pushing the adoption of the agency model, where the publishers set the e-book prices and pay the retailers commissions. Prior to this model and before Apple entered the e-book market, wholesale e-book pricing was common. The July finding concerned a separate lawsuit brought by the U.S. Justice Department. However District Judge Cote further ruled that her finding of liability was also a win for those states and consumers that had sued Apple in a separate lawsuit. They had sought damages of $840 million and claimed that the alleged price-fixing scheme had cost consumers millions of dollars.

Apple has asked the Second Circuit to overturn Judge Cote’s ruling. Furthermore Apple was set to go on trial in the case against the states and consumers in August 2014. Apple had requested that the latter case to be stayed while it waits for the appeal decision. However this was refused by the Second Circuit in May.

The settlement is a “binding agreement in principle” and would spare Apple a trial to determine the amount of damages for price fixing. Importantly the settlement will only move forward if Apple loses the pending appeal.

General Court upholds the EU Commission’s decision against Intel

By Nicole Daniel

On 12 June 2014 the General Court published its decision in the Intel case thereby upholding the Commission’s 2009 decision finding that Intel had abused its dominant position and imposed a fine of EUR 1.06 billion.

On 13 May 2009 the Commission adopted a decision under Article 7 of Regulation 1/2003 (Antitrust Regulation) prohibiting Intel’s anticompetitive conduct (for background see Newsletter No 5/2009, p. 5 and Newsletter No 3/2009, p. 4). According to the decision Intel had engaged in two types of abuse of its dominant position in the x86 CPU market (computer chips).

The first type of abuse was the grant of conditional rebates. Such rebates were granted to four PC and server manufacturers on the condition that they obtain all or almost all of their supplies from Intel. Furthermore payments to one downstream computer retailer were made conditional on the retailer’s undertaking that it only sold computers with Intel CPUs.

The second type of abuse was the use of naked restrictions. According to the Commission Intel granted direct payments to three computer manufacturers to halt, delay or limit launching specific products which incorporated chips from AMD, Intel’s only rival.

In its decision the Commission stated that Intel’s anticompetitive behaviour had undermined competition and innovation. It ordered Intel to end this anti-competitive behaviour and imposed a fine of EUR 1.06 billion. Intel appealed the Commission’s decision to the General Court.

The General Court upheld the Commission’s decision finding that it had correctly demonstrated the anti-competitive behaviour in question. It held that Intel’s attempts to conceal the anti-competitive nature of its practices and that the anti-competitive behaviour was an abuse of Intel’s dominant position. Furthermore the fine imposed by the Commission was deemed appropriate.

Regarding the rebates the General Court stated that by their very nature exclusivity rebates granted by a dominant undertaking are capable of restricting competition. Therefore – contrary to Intel’s claims – the Commission was not required to assess the circumstances of the case to show that the rebates had actually or potentially had the effect of foreclosing rivals from the market.

Similarly the General Court stated that the Commission was not required to assess whether in the light of the facts of this specific case the payments had restricted competition. The Commission was merely required evidence that Intel granted a financial incentive conditional upon an exclusivity condition.

The fine was appropriate and amounts for 4.15% of Intel’s annual turnover and is therefore well below the 10% ceiling.

Motorola Mobility won’t appeal the European Commission’s decision on patent licensing

By Nicole Daniel

Motorola Mobility (Motorola) has decided not to appeal the European Commission’s decision holding that it was abusing the way it licensed standard essential patents for mobile-phone standards.

The Commission had investigated technology companies since it was concerned that consumers are forced to pay more for phones or that phones may be withheld from the market if patent holders use their market power to get higher royalty rates for licensing their patents.

In April 2014 the Commission adopted a decision that found that seeking and enforcing an injunction in a German court against Apple regarding a smartphone standard essential patent constituted an abuse of its dominant position.

The Commission found that it was abusive of Motorola to both seek and enforce an injunction in Germany against Apple based on a standard essential patent that it had committed to license on FRAND terms and where Apple had agreed to licence the patent in question and even agreed to be bound by a determination of the German court of the FRAND royalties.

 According to the Commission it was anti-competitive of Motorola – under the threat of enforcing an injunction – to insist that Apple give up its right to challenge the validity or infringement of Motorola’s standard essential patents by Apple’s mobile devices.

Since there is no case law dealing with the legality of standard essential patents based injunctions under Article 102 TFEU and there are diverging conclusions in national courts, no fine was imposed on Motorola. Motorola was ordered to eliminate the negative effects resulting from its anti-competitive behaviour.

As Motorola did not file a court challenge to the Commission’s finding, this means that its decision stands and no judge will have a chance to scrutinize the Commission’s approach.

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