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ECJ Rules on Excessive Licensing Fees for Copyrights

By Martin Miernicki

On 14 September 2017 the Court of Justice of the European Union (“ECJ”) handed down its decision in AKKA/LAA v. Konkurences padome (C-177/16). The case originated in a fine imposed on the Latvian collective management organization (CMO) AKKA/LAA – which possesses a legal monopoly in Latvia – by the national competition authority. The authority asserted that the CMO had abused its dominant position by charging excessively high license rates. In the following, the Latvian Supreme Court made a reference for a preliminary ruling, asking the ECJ, inter alia,[1]

  1. whether it is appropriate to compare the rates charged by a national CMO to those rates charged by CMOs in neighboring and other member states, adjusted in accordance with the purchasing power parity index (PPP index);
  2. whether that comparison must be made for each segment of users or the average level of fees;
  3. above which threshold the differences between the compared fees indicate abusive conduct; and
  4. how a CMO can demonstrate that its license fees are not excessive.

 

Background

Article 102(a) of the TFEU declares the imposition of “unfair purchase or selling prices” as an abuse of a dominant position. The seminal case for the interpretation of this provision is United Brands v. Commission (case 27/76). Furthermore, the ECJ has repeatedly been asked to gives its opinion on this matter in the context of copyright management services. Relevant case law includes Ministère public v. Tournier (case 395/87), Kanal 5 v. STIM (C-52/07) and OSA v. Léčebné lázně Mariánské Lázně (C‑351/12). In contrast, U.S. antitrust doctrine does not, as a principle, recognize excessive pricing as an antitrust violation.

 

Decision of the court

The ECJ largely referred to the opinion of the Advocate General and confirmed that a comparison of fees charged in other member states, relying on the PPP index, may be used to substantiate the excessive nature of license rates charged by a CMO. However, the reference member states must be selected according to “objective, appropriate and verifiable” criteria (e.g., consumption habits, economic factors and cultural background) and the comparison must be made on a consistent basis (e.g., similar calculation methods). For this purpose, it is, in principle, permissible to refer to a specific segment of users if indicated by the circumstances of the individual case (paras 31-51). With regard to the level license fees, the ECJ ruled that there is no minimum threshold above which a license fee can be considered abusive; yet, the differences between the compared fees must be both significant (not a minor deviation) and persistent (not a temporary deviation). CMOs can justify their rates by reference to objective dissimilarities between the compared member states, such as differing national regulatory regimes (para 52-61).

 

Implications of the decision

The court reconfirmed its approach taken in the former decisions which introduced the comparison of fees charged in different member states as well as the “appreciably higher” standard. In the case at hand, the court further elaborated on this general concept by providing new criteria for the analysis which should assist competition authorities and courts in assessing excessive pricing under the EU competition rules. Clearly, however, it will still be challenging to apply those guidelines in practice. Furthermore, it seems that the ECJ does not consider the method of comparing license fees in other member states to be the only method for the purposes of Article 102(a) of the TFEU (see also paras 43-45 of the AG’s opinion); this might be of special relevance in cases not related to CMOs. In this connection, it is noteworthy that the ECJ expressly permitted authorities to consider the relation between the level of the fee and the amount actually paid to the right holders (hence, the CMO’s administrative costs) (paras 58-60).

Lastly – although the finding of abusive pricing appears to be the exception rather than the rule in European competition law practice – the decision supplements the case law on CMOs which is especially important since the rules of the Collective Management Directive 2014/26/EU (CMD) are relatively sparse in relation to users. Nevertheless, it should be noted that said directive contains additional standards for the CMOs’ fee policies. Article 16(2) states that tariffs shall be “reasonable”, inter alia, in relation to the economic value of the use of the licensed rights in trade and the economic value of the service provided by CMOs. These standards may be, however, overseen by national authorities (CMD article 36) which are not necessarily competition authorities. A coordinated application of the different standards by the competent authorities would be desirable in order to ensure the coherence of the regulatory regime.

[1] Focus is put here on the most important aspects of the decision.

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U.S. Appeals Court for the Ninth Circuit Affirms a Preliminary Injunction against Movie Filtering Service on Copyright Grounds

By Valerio Cosimo Romano

On 24 August 2017, the U.S. Court of Appeals for the Ninth Circuit (“Appeals Court”) affirmed a preliminary injunction from the U.S. District Court for the Central District of California (“District Court”) against the defendant in an action under the Copyright Act and the Digital Millennium Copyright Act (“DMCA”).

 

The parties

Disney Enterprises, LucasFilm Limited, Twentieth Century Fox Film Corporation, and Warner Brothers Entertainment (“Studios” or “Plaintiffs”) produce and distribute copyrighted motion pictures and television shows through several distribution channels. The Studios employ technological protection measures (“TPMs”) to protect against unauthorized access to and copying of their works.

 

VidAngel, Inc. (“VidAngel” or “Defendant”) operates an online streaming service that removes objectionable content from movies and television shows. It purchases physical discs containing copyrighted movies and television shows, rips a digital copy and streams to its customers a filtered version of the work.

 

The lawsuit

The Studios filed suit against VidAngel, alleging copyright infringement and circumvention of technological measures controlling access to copyrighted works in violation of the DMCA. At the moment of filing suit, Defendant offered more than eighty copyrighted works, which it was not licensed or otherwise authorized to copy, perform, or access. VidAngel denied the statutory violations and raised affirmative defenses of fair use and legal authorization by the Family Movie Act of 2005 (“FMA”).

The Studios moved for a preliminary injunction, and the District Court granted the motion, enjoining Defendant from copying and streaming, transmitting, or otherwise publicly performing or displaying any of Plaintiff’s copyrighted works, circumventing technological measures protecting Plaintiff’s copyrighted works or engaging in any other activity that violates, directly or indirectly.

 

The District Court found that Defendant had circumvented the technological measures controlling access to the Studios’ works and violated the Studios’ exclusive right to reproduce and publicly perform their works. The District Court rejected instead Defendant’s FMA defense, holding that the service did not comply with FMA (which requires a filtered transmission to “come from an ‘authorized copy’ of the motion picture) and (ii) that Defendant was not likely to succeed on its fair use defense.

VidAngel appealed, claiming that FMA exempts VidAngel from liability for copyright infringement and that anti-circumvention provision of the DMCA does not cover the plaintiffs’ technological protection measures.

 

Merits of the case

First, the Appeals Court found that the District Court had not abused its discretion in concluding that Defendant’s copying infringed the Studios’ exclusive reproduction right, because lawful owners of a copy of the copyrighted work are only entitled to sell or otherwise dispose of the possession of that copy, and not to reproduce it.

The Appeals Court also found that the District Court had not abused its discretion in finding that the Studios are likely to succeed on their DMCA claim because VidAngel had offered no evidence that the Studios had either explicitly or implicitly authorized DVD buyers to circumvent encryption technology to access the digital contents of their discs.

The Appeals Court then moved to VidAngel’s defenses. It found that The FMA exempts compliant filtered performances, rather than the processes that make such performances possible. Moreover, the Court found that FMA  has been created to provide for the protection of intellectual property rights, which would not be preserved by VidAngel’s interpretation of the statute. Indeed, VidAngel does not stream from an authorized copy of the Studios’ motion pictures: it streams from the “master file” copy it created by ripping the movies from discs after circumventing their TPMs. Therefore, the District Court had not abused its discretion in concluding that VidAngel is unlikely to succeed on the merits of its FMA defense to the Studios’ copyright infringement claims.

In order to exclude infringement on copyright, Defendant also relied on the fair use theory.  In determining whether the use of a copyrighted work is fair, the Appeals Court considered again: (i) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (ii) the nature of the copyrighted work; (iii) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (iv) the effect of the use upon the potential market for or value of the copyrighted work. The Appeals Court sided again with the District Court, affirming that VidAngel’s service simply omits portions that viewers find objectionable, and transmits them for the same intrinsic entertainment value as the originals. Therefore, VidAngel’s use is not transformative (and thus it cannot be protected by fair use).

VidAngel also raised a defense related to the economic effects of its business. It argued that its service actually benefits the Studios because it purchases discs and expands the audience for the copyrighted works to viewers who would not watch without filtering. However, the Appeals Court confirmed the District Court’s view that VidAngel’s service is an effective substitute for Plaintiff’s unfiltered works and that neither the fact that VidAngel purchases the discs excuses its infringement, because any allegedly positive impact of Defendant’s activities on Plaintiffs’ prior market in no way frees defendant to usurp a further market that directly derives from reproduction of the plaintiffs’ copyrighted works. Thus, and a market harm caused by the infringing activity can be presumed.

 

Irreparable harm and balance of equities

As for irreparable harm, the Appeals Court sided with the District Court in determining  that VidAngel’s service undermines the value of the Studios’ copyrighted works, their business model, their goodwill and negotiating leverage with licensees and that the loss of goodwill, negotiating leverage, and that non-monetary terms in the Studios’ licenses cannot readily be remedied with damages. The Appeals court therefore concluded that the eventual financial hardship deriving from discontinuance of infringing activities does not outweigh the irreparable harm likely to befall the Studios without an injunction.

For these reasons, the Appeals Court affirmed the preliminary injunction from the District Court.

CJEU: Online Sharing Platforms like “The Pirate Bay” May Constitute Copyright Infringement by Indexing BitTorrent Files

By Katharina Erler

The Second Camber of the Court of Justice of the European Union (CJEU) ruled on 14 of June 2017 that the making available and management of a sharing platform on which user-generated BitTorrent files related to copyright protected works are indexed may constitute copyright infringement. In particular, the concept of Article 3 (1) EU InfoSoc Directive (2001/29/EC) “communication to the public” must be interpreted as covering situations, where the protected works are not hosted by the sharing website operators themselves, but by users through a peer-to-peer network, given that the operators of the sharing platform play an essential role in making those works available. The case is Stichting Brein v. Ziggo and XS4ALL Internet BV, C-610/15.

Stichting Brein, a Netherlands foundation which safeguards the interests of copyright holders, has initiated proceedings before the courts in the Netherlands requesting that the internet access provider Ziggo and XS4ALL shall be ordered to block the domain names and IP addresses of the online sharing platform “The Pirate Bay”. A significant number of the subscribers of Ziggo and XS4ALL use the online platform The Pirate Bay.

The Pirate Bay is a website, which allows its users to share music and video files, much of which, according to the opinion of Advocate General Szpunar of 8 February 2017 90 % to 95 %, contain protected works distributed without the consent of the authors. Since Pirate Bay is a website that offers the possibility for content-sharing in the context of a peer-to-peer network based on a BitTorrent protocol, the shared files are generated by its users and downloaded, divided into segments, from several peer computers in a decentralized way. In order to generate and share these files, users must first download a specific software called “BitTorrent Client”, which is not provided by Pirate Bay. Pirate Bay allows its users to find other users (“peers”) available to share the desired file by indexing torrent files related to the video or audio files on its website. The works to which those torrent files refer may be downloaded onto the users’ computers in segments through their “BitTorrent Client” software.

The Court of first instance upheld Stichting Breins request. However, the internet access providers filed an appeal against this decision. The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) noting that in the present case it has been established that (1) the actions of Pirate Bay make protected works available to the public without the authors consent and that (2) subscribers to Ziggo and XS4ALL, through Pirate Bay, make protected works available without the consent of the authors and thus infringe the copyright of those right holders.

The Hoge Raad, however, referred two questions to the CJEU: (1) whether Pirate Bay itself “communicates” works to the public within the meaning of Article 3 (1) of EU InfoSoc Directive (2001/29/EC) and if question (1) is answered in negatively, (2) whether Article 8 (3) of EU Directive 2001/29 and Article 11 of EU Directive 2004/48 offer any scope for obtaining an injunction against an intermediary, of that intermediary facilitates the infringing acts of third parties in the way referred to in question (1).

 

Legal context

Recital (23) of of EU InfoSoc Directive 2001/29/EC of the European Parliament and of the Council on the harmonization of certain aspects of copyright and related rights in the information society (InfoSoc Directive) states expressly, that author’s right of communication to the public should be understood in a broad sense and should cover any such transmission or retransmission of a work to the public by wire or wireless means, including broadcasting.

Recital (27) of EU InfoSoc Directive (2001/29/EC) states that the mere provision of physical facilities for enabling or making a communication is not covered by communication within the meaning of this Directive.

Article 3 (1) (“Right of communication to the public of works and right of making available to the public other subject matter”) of EU InfoSoc Directive (2001/29/EC) stipulates that Member States shall provide authors with the exclusive right to authorize or prohibit any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access them from a place and at a time individually chosen by them.

 

Consideration of the questions referred to the CJEU

Of two questions referred to the CJEU by the Hoge Raad der Nederlanden, the CJEU only explicitly addressed the question whether there is a “communication to the public” within the meaning of Article 3 (1) of the EU InfoSoc Directive by the operator of a website, if no protected works are available on that website, but a system exists by means of which metadata on protected works which are present on the users’ computers are indexed and categorised for users, so that the user can trace and upload and download the protected work by the basis thereof.

In essence, the CJEU answered the question, whether the operators of an online sharing platform themselves commit copyright infringment by managing and indexing BitTorrent files, thereby allowing users to share user-generated and user-stored files containing protected works.

First and in view of its past case-law, the CJEU emphasized, as a general rule, that any act by which a user, with full knowledge of the relevant facts, provides its clients with access to protected works is an “act of communication” for the purposes of Article 3 (1). To determine this general rule for user-liability, the CJEU explicitly referred to its recent series of decisions on copyright infringement via links (CJEU, GS Media, C-160/15) and/or add-ons (CJEU, Fimspeler, C-527/15), which refer to protected works.

With regard to the liability of Pirate Bay – the core question in the case at hand – the CJEU – in line with the opinion of Advocate General Szpunar – noted that it is common knowledge that copyright-protected works are made available through Pirate Bay in such a way that users may access those works from wherever and whenever.

Most importantly the CJEU highlighted, although video or audio files have not been placed online by the platform operators themselves but by its users, the operators of Pirate Bay play an essential role in making those works available. The CJEU hold that by making available and managing an online platform the Pirate Bay operators intervene with full knowledge of the consequences of their conduct, to provide access to protected works, especially by indexing on that platform torrent files, which allow users to locate and share those works.

It is worth mentioning that in line with its Filmspeler decision, the CJEU in this case further broadened the scope of the copyright holders’ right of communication to the public. According to the CJEU “full knowledge” of the communication party with regard to “the consequences of their conduct”, is sufficient to hold the operators themselves liable.

By referring to the opinion of Advocate General Szpunar, the CJEU additionally found, as a main criterion for finding the operators of a sharing platform themselves liable for copyright infringement, that without making such a platform available and managing it, the works could not be shared by the users or, at the very least, sharing them would prove to be more complex.

In that context, the CJEU emphasized that the website “The Pirate Bay” cannot be considered to be making a “mere provision” of physical facilities for enabling or making a communication within the meaning of recital 27 EU InfoSoc Directive (2001/29/EC). According to the CJEU, this is not only true because the platform indexes the torrent files in such a way that the works may be shared easily, but also because the platform offers an index classifying the works in different categories based on i.a. the genre. Moreover, the operators of Pirate Bay delete obsolete or faulty torrent files and actively filter the user-hosted content.

As to the question of whether the protected works were communicated to the public, the CJEU on one hand referred to the order of reference, which reveals that a large number of Ziggo and XS4ALL subscribers have downloaded media files through Pirate Bay. On the other hand, the CJEU noted that the operators on their sharing platform, explicitly claimed to have several dozens of million users (“peers”). This large number of users can potentially and at any time access the protected works, which are shared through Pirate Bay.

As a core matter, the CJEU discussed whether the Pirate Bay operators communicated to a “new” public, which is a public that was not taken into account by the copyright holders when they authorized the initial communication. This raises the decisive question of whether the operators were aware of the missing authorization of the copyright holders. In contrast to the opinion of Advocate General, the CJEU held that the operators of Pirate Bay may simply be found liable because they: (1) were informed that this platform, which they make available to users and manage, provides access to works published without authorization of the copyright holder and (2) were aware that the operators display, on blogs and forums available on their website, their purpose of making protected works available and encouraging their users to make copies of that works. In fact, the CJEU found that, if the operators are aware of the possibility of infringing copyrights through their own conduct, managing their website, they may be found liable of infringement themselves. Under this ruling a concrete knowledge of the illegality of an individual shared work is no longer required to justify the liability for platform operators.

Furthermore, the CJEU noted, that there can be no dispute that the online sharing platform is carried out with the purpose of obtaining profit therefrom, which is clear from the considerable advertising revenues generated by Pirate Bay.

For these reasons, the Court held that the concept of “communication to the public” must be interpreted as covering the making available and managing of a sharing platform. The Pirate Bay, which by indexing of BitTorrent files and providing a search engine, allows its users to locate and share protected works in the context of a peer-to-peer network without the consent of the copyright holders. In the light of the answer to this first referred question, the CJEU saw no need to answer the second question.

It is, however, worth mentioning that the CJEU just answered the referred preliminary question of whether the managing of the website Pirate Bay is covered by the concept of “communication to the public” and therefore may constitute copyright infringement. It did not take position as to Stichting Breins’ principle request in the main proceedings that in consequence of these considerations the internet access provider Ziggo and XS4ALL be ordered to block the IP addresses and domain name of The Pirate Bay.

Athletes’ Right of Publicity Claim Preempted by Copyright Act

By Marie-Andrée Weiss

The U.S. Court of Appeals for the Ninth Circuit ruled on 5 April 2017 that the Copyright Act preempted the California right of publicity claims of Plaintiffs, former college athletes whose photographs are part of the National Collegiate Athletic Association (NCAA) library of images license online by Defendant. The case is Maloney v. T3Media, 15-55630.

Plaintiffs played on the Catholic University basketball team from 1997 to 2001, which won the 2001 Men’s Division III NCAA championship game. Defendant T3Media entered into an agreement with NCAA in 2012 to store, host and license the images in the NCAA photo library. The NCAA runs 90 championships in 24 sports across 3 divisions, and its library contains thousands of photographs of championship games, including some taken during the 2001 Men’s Division III championship game in which Plaintiffs participated.

T3Media sold non-exclusive licenses online for two years that allowed users to download copies of the NCAA photographs for personal use. Plaintiffs contended that such action was a violation of their California statutory right of publicity, California Civil Code § 3344, California common law right of publicity, and a violation of California Unfair Competition Law.

They filed a putative class action suit in June 2014 in the U.S. Central District Court of California on behalf of current and former NCAA athletes whose names, images and likeness had been used without their consent by Defendant for purpose of advertising, selling, or soliciting the purchase of these photographs.

 

The two-steps of an anti-SLAPP analysis

Defendant moved for a special motion to strike under California anti-SLAPP statute, Cal. Code Civ. Proc. § 425.16, which aims to prevent strategic lawsuits against public participation (SLAPP). Courts follow two-steps when assessing an anti-SLAPP motion to strike: first the moving defendant must show that plaintiff’s suit arises from an act in furtherance of defendant’s right to free speech, as protected by the First Amendment. The second part of the assessment shifts the burden to plaintiff who must demonstrate a probability of prevailing on any of her claims.

T3Media had argued that the photographs at stake, and their captions, had been published in a public forum in connection with a matter of public interest. The district court agreed, finding that the photographs “fell within the realm of an issue of public interest (District Court, at 1134).

This shifted the burden to Plaintiffs to demonstrate a reasonable probability of prevailing on any of their claims. Defendant claimed three affirmative defenses: (1) Plaintiffs’ claims were preempted by federal copyright law, (2) were barred under the First Amendment, and (3) California right of publicity law exempts from liability use of likeness in connection with any news, public affairs, or sports broadcast or account.

The district court did not address the last two defenses as it found that Plaintiffs’ claims were preempted by the Copyright Act, because Plaintiffs asserted rights that fell within the subject matter of copyright, and granted Defendant special motion to strike. Plaintiffs appealed to the Ninth Circuit, which affirmed.

As Plaintiffs had conceded that their suit arose from acts in furtherance of T3Media’s right to free speech, the Ninth Circuit only examined whether Plaintiffs indeed had demonstrated a reasonable probability of prevailing on their claims, and found they had not met that burden, as the Copyright Act preempted their claims.

 

The copyright preemption two-part test

Section 301 of the Copyright Act provides that common law or statutory state laws are preempted by rights “equivalent to any of the exclusive rights within the general scope of copyright.” Courts in the Ninth Circuit use a two-part test to determine whether a state law claim is preempted the Copyright Act: the courts first decide if the subject matter of the state law is within the subject matter of copyright, and then determine if the rights asserted under state law are equivalent to the exclusive rights of the copyright holders, as determined by Section 106 of the Copyright Act. Parties only argued about the first part of the test.

 

The right of publicity claim is not preempted if its basis is the use of a likeness

Plaintiffs argued that their right of publicity claim was not preempted by the Copyright Act because publicity right claims protect the persona of an individual, which cannot be fixed in a tangible medium of expression (p. 12). They relied on Downing v. Abercrombie & Fitch, where the Ninth Circuit held that “the content of the protected right must fall within the subject matter of copyright” for the Copyright Act to preempt the state claim (Downing at 1003). Plaintiffs reasoned that their likeness is not with the subject matter of copyright and thus their state claim cannot be preempted by the Copyright Act.

Defendants argued that Plaintiffs’ likeness had been captured in an artistic work and had not been used on merchandise or in advertising. Indeed, the Ninth Circuit noted that “the “core” of the publicity right is the right not to have one’s identity used in advertising” (p. 13). The court of appeals concluded “that a publicity-right claim is not preempted when it targets non-consensual use of one’s name or likeness on merchandise or in advertising. But when a likeness had been captured in a copyrighted artistic visual work and the work itself is being distributed for personal use, a publicity-right claim interferes with the exclusive rights of the copyright holder, as is preempted by section 301 of the Copyright Act“ (p. 13)(emphasis of the Court).

The Ninth Circuit distinguished its Downing case from the case at stake, as the right of publicity claim in Downing is not about the publication of the photograph, but its use: Abercrombie used the surfer’s likeness in the catalog and had also sold reproductions of the tee-shirts worn by them in the photograph. The Ninth Circuit concluded that If the basis of the right of publicity claim is the use of a likeness in a photograph, the right of publicity claim is not preempted by copyright (p. 17).

 

When is a likeness misused in a work protected by copyright?

Therefore, the “crux of the issue” was whether the basis of the publicity-right claim was indeed to defend Plaintiff against a misuse of their likeness by Defendant. The court reasoned that Section 301 does not distinguish among different types of work protected by copyright, and that the pertinent issue was the way the likeness was used, not the type of the copyrighted work. In Downing, the basis of the publicity-right claim was not the publication of the photograph, but its use to advertise Abercrombie’s products and the creation of tee-shirts similar to those worn by Plaintiffs in the photograph, which were commercial exploitation of Plaintiff’s likeness (p. 19).

The Ninth Circuit noted further that it held in 2006, in Laws v. Sony Music Entertainment, Inc., that “federal copyright law preempts a claim alleging misappropriation of one’s voice when the entirety of the allegedly misappropriated vocal performance is contained within a copyrighted medium” (Laws at 1141). The Ninth Circuit also cited its Jules Jordan Video, Inc. v. 144942 Canada Inc. 2010 case, where it ruled that federal copyright law preempts a claim alleging misappropriation of one’s name and persona based entirely on the misappropriation of DVDs of movies in which plaintiff performed and of which he owned the copyright. Plaintiff had objected to the use of his likeness on the covers of counterfeit DVDs, which the Ninth Circuit found to be “still shots” of the performance protected by copyright. The Ninth Circuit reasoned that Plaintiff claim was a copyright claim, not a claim that his likeness has been used on an unrelated product or in advertising. For the Ninth Circuit, a likeness embodied in a work protected by copyright is misused if it is used on an unrelated product or in advertising.

 

Why did Plaintiffs’ claim fail

Plaintiffs’ attorney argued at the hearing that Defendant was selling the photographs “as poster art, as desktop backgrounds, as digital goods” (video at 11:36). This is an interesting argument, as the Ninth Circuit attaches great importance to the type of use of the likeness. However, it is the consumers who are choosing how to use the images, within the rights provided to them by the license, not the Defendant.

The District Court explained that ruling in favor of Plaintiffs “would destroy copyright holders’ ability to exercise their exclusive rights under the Copyright Act, effectively giving the subject of every photograph veto power over the artist’s rights under the Copyright Act and destroying the exclusivity of rights the Copyright Act aims to protect (District Court at 1138).

Plaintiff’s attorney recognized during the hearing that non-commercial use of the photos would be acceptable (video at 13:36). When asked by the judges to give an example of non-commercial use, he suggested editorial use, in a student newspaper or a national newspaper. While the Court did thus not address the issue of free speech, several media organizations filed an amici curiae brief in support of Defendant, to ensure that “the right of publicity is not transformed into a right of censorship—one that can be used to prevent the dissemination of matters of public importance” (amici curiae brief p. 9).

Streaming by Using a Multimedia Player: ECJ Rules in Favor of Copyright Holders

By Martin Miernicki

Following the opinion of the Advocate General, the ECJ gave its opinion in Stichting Brein v. Wullems (C‑527/15) on 26 April 2017.[1] The court had to deal with a multimedia player (“filmspeler”), a device which allowed end users to easily stream content from online sources. Pre-installed add-ons – freely available on the internet – to the “filmspeler” contained links which connected to third-party websites which in turn made available protected works without the right holders’ consent; the multimedia player was specifically marketed for this function and sold for profit.

 

Background

Articles 2(a) and 3(1) of the so-called Copyright Directive reserve the exclusive rights to reproduction as well as communication to the public in respect of their works for authors. Article 5(1) exempts certain temporary acts of reproduction from the scope of the authors’ exclusive rights, subject to the “three-step test” contained in article 5(5). Stichting Brein v. Wullems marks a further important addition to the case law involving the construction of these provisions, especially in the online environment. Relevant prior judgements include Nils Svensson v. Retriever Sverige (C-466/12), C More Entertainment v. Linus Sandberg (C-279/13), BestWater International v. Michael Mebes (C-348/13), and GS Media v. Sanoma Media Netherlands (C-160/15)[2] (on hyperlinks) as well as Infopaq Int’l v. Danske Dagblades Forening  (C-5/08, “Infopaq I”), Football Association Premier League v. Media Protection Services (C-403/08 & C-429/08), Infopaq Int’l v. Danske Dagblades Forening (C-302/10, “Infopaq II”), and Public Relations Consultants Ass’n v. Newspaper Licensing Agency (C-360/13) (on temporary reproductions).

 

The questions referred

The questions referred to the ECJ by the national (Dutch) court related to the perspective of both commercial and end users. It asked, first, whether the sale of a multimedia player as described above constituted a communication to the public within the meaning of the Copyright Directive’s article 3(1); and, second, whether the streaming of unauthorized content by end users with the aid of such multimedia player was covered by article 5(1) and compatible with article 5(5) of the directive.

 

Selling the multimedia player constitutes a communication to the public

In reference to its prior case law, the court held that the defendant’s conduct constituted an “act of communication” (para 42), directed to a “public” (para 46). Moreover, it reaffirmed its concept of the “new public”. In line with its ruling in GS Media, the court attributed significant importance to the fact that the multimedia player was sold for profit and with the full knowledge that the links provided connected to works made available without the consent of the right holders (para 49 et seq).

 

Streaming by using the media player is not exempted from the scope of the reproduction right

The actual question was whether the acts at hand carried out by end users could be considered “lawful use” within the meaning of the Copyright Directive. In this respect, the court distinguished the present case from its prior decisions and ruled that the temporary reproductions made while streaming unauthorized content through the media player did not satisfy the conditions set forth by article 5(1). Again, the court emphasized that this function was the “main attraction” of the multimedia player (para 69). Finally, the court noted that the streaming would “adversely affect the normal exploitation” of the copyrighted content and thus conflict with the “three-step test” (para 70).

 

What does the judgement mean?

The first of part of the judgement is line with the prior case law. As pointed out by the Advocate General, exempting the sale of a media player like that at issue would be too “reductionist” (para 49). Indeed, there is no significant difference between posting a hyperlink on a website and integrating that link in a multimedia player (para 51). However, some questions concerning the court’s concept of the “new public” remain. It is not clear, for instance, under what circumstances a person “ought to know” that a hyperlink provides access to infringing content; it is even more difficult to define the scope of the “for profit” criterion. In both GS Media and the present case, the situation was rather clear; yet, demarcation problems might arise, especially, if the communication does not occur as a core part of the activities carried out for profit, but is of a rather complementary nature (e.g., a lawyer posting hyperlinks on his or her law firm’s blog). Nevertheless, it seems that the (subjective) approach taken by the court in both cases towards the communication to the public of protected works strikes a reasonable balance between the protection of right holders and the interests of internet users.

This also applies, in principle, to the ECJ’s ruling in respect of streaming by end users. In this context, it should be noted that the court merely gave its opinion on article 5(1). Other exemptions or limitations may apply for the benefit of consumers, especially the “private copying exemption” contained in article 5(2)(b) of the Copyright Directive (cf. para 70). Furthermore, as the GA noted, the question whether an end user knew (or should have known) that he or she was streaming illegal content can be taken into account when dealing with personal liability (para 71). Lastly, although the decision will clearly have strong implications for the streaming of copyrighted works in general, the ECJ limited its decision to the streaming of protected works via the “filmspeler”, so that the possibility of flexible approaches in future cases is not excluded.

[1] See already Transatlantic Antitrust and IPR Developments Issue 1-2016.

[2] See for more details Transatlantic Antitrust and IPR Developments Issue 2-2016 and Issue 3-4/2016.

CJEU: EU-Directive 2001/29/EC Does Not Permit National Legislation to Provide a Special Defense to Copyright Infringement for Retransmission of Television Broadcasts via the Internet

By Katharina Erler

The Fourth Camber of the Court of Justice of the European Union (CJEU) ruled on 1 of March 2017 that Article 9 of EU InfoSoc Directive (2001/29/EC) does not cover national legislation, which provides a special defense to copyright infringement by retransmission of works broadcast on television channels by cable or via the internet. In particular, Article 9 must be interpreted as not permitting national legislation which allows the immediate retransmission of free-to-air broadcasts by cable and via the internet, if it is done within the area of the initial broadcast. The case is ITV Broadcasting Limited v. TVCatchup Limited, C-275/15.

The appellants in the main proceedings, commercial television broadcasters ITV, Channel 4 and Channel 5, own copyrights under national law in their televisions broadcasts and included films. TVCatchup (TVC) offered an internet television broadcasting service, permitting its users to receive streams of TV shows, including those transmitted by ITV, Channel 4, and 5.

It is important to note that the CJEU has dealt with this case before: In its judgement of 7 March 2013, ITV Broadcasting and Others (C-607/11), the CJEU held that the retransmission of protected works and broadcasts by means of an internet stream, such as the service of TVCatchup, constitutes a communication to the public under Article 3 of Directive 2001/29/EC (InfoSoc Directive) and therefore must be authorized by the authors concerned.

The High Court of Justice (England & Wales) followed this judgement and found that TVC had infringed the copyright of television broadcasters. It, however, found that TVCatchup could rely on a defense under Section 73 (2) (b) and (3) of the United Kingdom’s Copyright, Designs and Patent Act (CDPA).

The broadcasters filed an appeal against this High Court decision. The Court of Appeal (England & Wales) took the view that the national defense provisions in Section 73 (2) (b) and (3) must be interpreted in light of Article 9 of Directive 2001/29 and consequently referred a number of questions concerning the interpretation of Article 9 to the CJEU for a preliminary ruling.

 

Legal context

Article 9 (“Continued application of other legal provisions”) of Directive 2001/29/EC of the European Parliament and of the Council on the harmonization of certain aspects of copyright and related rights in the information society (InfoSoc Directive) states that the Directive shall be without prejudice to provisions concerning in particular […] access to cable of broadcasting services […].

Article 1 of the InfoSoc Directive (2001/29/EC) with regard to the scope of the Directive stipulates that this Directive shall leave intact and shall in no way affect existing Community provisions relating to […] (c) copyright and related rights applicable to broadcasting of programs by satellite and cable retransmission.

Section 73 (2) (b) and (3) of the United Kingdom’s Copyright, Designs and Patent Act (CDPA), which implemented Directive 2001/29/EC, that copyright is not infringed “if and to the extent that the broadcast is made for reception in the area in which it is re-transmitted by cable and forms part of a qualifying service”.

 

Consideration of the questions referred to the CJEU

Of five questions referred to the CJEU by the Court of Appeal, the CJEU explicitly only responded to one, which referred to the phrase “access to cable of broadcasting services” under Article 9 of Directive 2001/29/EC, and asked whether it applies to (1) national provisions which require cable networks to retransmit certain broadcasts or (2) national provisions which permit the retransmission by cable of broadcasts (a) where the retransmissions are simultaneous and limited to areas in which the broadcasts were made for reception and/or (b) where the retransmissions are of broadcasts on channels which are subject to certain public service obligations.

In essence, the CJEU answered the question whether Article 9 of Directive 2001/29/EC might be interpreted as permitting national legislation to provide a separate general defense to retransmission of broadcasting services via cable— including the internet—without the authors consent.

By emphasizing that the concept of “access to cable broadcasting services” must be given an autonomous and uniform interpretation throughout the European Union, the CJEU—in line with the opinion of the Advocate General from 8 September 2016—found that the term “access to cable” is different from that of “retransmission of cable” under Article 1 (c), because only the latter notion designates the transmission of audio-visual content. Therefore, taking into account the wording, Article concerns not the transmission of content and the public access to this content, but rather the access to a network.

Setting Article 9 in the context of the whole Directive, the CJEU clearly states that the exclusion of EU provisions on “cable retransmission” from the scope of Directive 2001/29/EC, in this instance, refers to EU Directive 93/83 concerning copyrights applicable to satellite broadcasting and cable retransmission. Since, however, the case at hand concerns the retransmission within one Member State, the provisions of Directive 93/83, which solely apply to cross-border retransmissions, are irrelevant.

Highlighting that the principal objective of the InfoSoc Directive (2001/29/EC) is to establish a high level of protection for authors, the CJEU referred to its earlier ruling from the previous referral by the UK High Court in the same case (ITV Broadcasting and Others, C-607/11). As ruled in that decision, the retransmission by means of an internet stream, such as the one at issue, constitutes a “communication to the public” under Article 3 (1) of Directive 2001/29/EC and, therefore, results in copyright infringement unless it falls within the scope of Article 5, which sets out an exhaustive list of exceptions and limitations to the right of communication to the public. In the view of the CJEU, it is common ground that the retransmission at issue does not fall within the scope of any of the exceptions and limitations set out in Article 5 of Directive 2001/29/EC.

Most importantly, the CJEU ruled – referring to the opinion of the Advocate General from 8 September 2016 – that Article 9 of Directive 2001/29/EC may not be interpreted to mean that it independently permits exceptions to the right of communication to the public in Article 3. The objective pursued by Article 9 is, indeed, to maintain the effect of provisions in areas other than the area harmonized in Directive 2001/29/EC. Keeping the general objective of the Directive, especially the high level protection of authors and the exhaustive nature of Article 5 in mind, the CJEU found that Article 9 may not be interpreted as covering retransmissions.

The Court noted furthermore, that the InfoSoc Directive contains no legal basis that would justify affording less protection to television channels subject to public service obligations.

As a result of the CJEU’s decision, the national exception to copyright under Section 73 of UK’s CDPA with regard to retransmissions shall be considered as not compatible with the EU legal framework. This decision seems to be consistent with the objective of the InfoSoc Directive, which is to set harmonized rules on copyrights and especially to ensure a high level of protection for the authors.

It is worth mentioning that the question of whether national rules can regulate retransmission and introduce exceptions of copyright was again raised in a case, decided by the CJEU shortly thereafter. On 16 March 2017, in AKM v. Zürsnet (C-138/16), the CJEU, in contrast to the earlier case ITV Broadcasting v. Others (C-607/11), found that the transmission of television and radio broadcasts by a cable network installation does not constitutes a communication to a new public under Article 3 of the InfoSoc Directive. In that Case, the CJEU held that due to the fact that the persons who receive the transmission of the protected works have been taken into account by the rightsholders when they granted the original authorization for the national broadcaster, the transmission does not infringe copyright under the InfoSoc Directive. The CJEU did not take into account its broad interpretation of “communication to the public” as referred to in its earlier decision ITV Broadcasting and Others (C-607/11). This decision, however, might cause confusion as to the requirements of “communication to the public” in Article 3 of the InfoSoc Directive and the question of whether national legislation may introduce exceptions of copyright for retransmissions of broadcasts.

CJEU rules that lending an e-book is legal if the first sale right has been exhausted

By Marie-Andrée Weiss

The Third Chamber of the Court of Justice of the European Union (CJEU) ruled on 10 November 2016 that it is legal under EU law for a library to lend an electronic copy of a book. However, only one copy of the e-book can be borrowed at the time, the first sale of the e-book must have been exhausted in the EU, and the e-book must have been obtained from a lawful source. The case is Vereniging Openbare Bibliotheken v. Stichting Leenrecht, C-174-15.

 

Legal framework

Article 2 of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (the InfoSoc Directive) provides authors exclusive rights in their works, including, under its Article 3, the exclusive right to communicate their works to the public by wire or wireless means. Its Article 4 provides that these exclusive rights are exhausted by the first sale or by other transfers of ownership of the work in the EU.

Article 6(1) of Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on the rental right and lending right and on certain rights related to copyright in the field of intellectual property, the Rental and Lending Rights Directive (RLR Directive), gives Member States the right to derogate from the exclusive public lending right provided to authors by Article 1 of the RLR Directive, provided that authors are compensated for such lending.

Article 15c(1) of the Dutch law on copyright, the Auteurswet, authorizes lending of a copy of a literary, scientific, or artistic work, provided that the rightsholder consented to the lending and is compensated for it. The Minister of Justice of the Netherlands set up a foundation to that effect, the Stichting Onderhandelingen Leenvergoedingen (StOL), which collects lending rights payments as a lump sum from lending libraries and then distributes those payments to rightsholders through collective management organizations.

The Dutch government took the view that e-books are not within the scope of the public lending exception of the Auteurswet and drafted a new law on that premise. The Vereniging Openbare Bibliotheken (VOB), which represents the interests of all the public libraries in the Netherlands, challenged this draft legislation and asked the District Court of The Hague to declare that Auteurswet covers lending of e-books.

The Court stayed the proceedings and requested a preliminary ruling from the CJEU on the question of whether Articles 1(1), 2(1)(b) and 6(1) of the Renting and Lending Rights Directive authorize e-lending, provided that only one library user can borrow the e-book at a time by downloading a digital copy of a book which has been placed on the server of a public library.

If this is indeed authorized by the Directive, the District Court asked the CJUE whether article 6 of the Directive requires that the copy of the e-book which is lent has been brought into circulation by an initial sale or other transfer of ownership within the European Union by the rightsholder, or with her consent within the meaning of Article 4(2) of the InfoSoc Directive.

The District Court also asked whether Article 6 of the RLR Directive requires that the e-book which is lent was obtained from a lawful source.

Finally, the District asked the CJEU to clarify whether e-lending is also authorized (if the copy of the e-book which has been brought into circulation by an initial sale or other transfer of ownership within the European Union by the right holder or with her consent) when the initial sale or transfer was made remotely by downloading.

 

First: Is e-lending legal under the renting and lending rights directive?

The CJEU noted that Article 1(1) of the RLR Directive does not specify whether it also covers copies which are not fixed in a physical medium, such as digital copies (§ 28). The CJEU interpreted “copies” in the light of equivalent concepts of the WIPO Copyright Treaty of 20 December 1996, which was approved by the European Community, now the European Union. Its Article 7 gives authors the exclusive right to authorize “rentals” of computer programs. However, the Agreed Statements concerning the WIPO Copyright Treaty, which is annexed to the WIPO Treaty, explains that Article 7’s right of rental “refer[s] exclusively to fixed copies that can be put into circulation as tangible objects,” thus excluding digital copies from the scope of Article 7.

The Court noted, however, that “rental” and “lending” are separately defined by the RLR Directive. Article 2(1) (a) defines “rental” as “making available for use, for a limited period of time and for direct or indirect economic or commercial advantage,” while Article 2(1) (b) defines “lending” as “making available for use, for a limited period of time and not for direct or indirect economic or commercial advantage, when it is made through establishments which are accessible to the public.” The Court examined preparatory documents preceding the adoption of Directive 92/100, which the RLD Directive codified and reproduced in substantially identical terms, and noted that there was “no decisive ground allowing for the exclusion, in all cases, of the lending of digital copies and intangible objects from the scope of the RLR Directive.” The Court also noted that Recital 4 of the RLR Directive states that copyright must adapt to new economic developments and that e-lending “indisputably forms part of those new forms of exploitation and, accordingly, makes necessary an adaptation of copyright to new economic developments” (§ 45).

The CJEU noted that borrowing an e-book as described by the District Court in its preliminary question “has essentially similar characteristics to the lending of printed works,” considering that only one e-book can be borrowed at the time (§ 53). The CJEU therefore concluded that that “lending” within the meaning of the RLR Directive includes lending of a digital copy of a book.

 

Second: May only e-books first sold in the EU be lent?

The InfoSoc Directive provides that the exclusive distribution rights of the author are exhausted within the EU after the first sale or other transfer of ownership in the EU of the work by the right holder or with his consent. Article 1(2) of the RLR Directive provides that the right to authorize or prohibit the rental and lending of originals and copies of copyrighted works is not exhausted by the sale or distribution of originals and copies of works protected by copyright.

The CJEU examined Article 6(1) of the RLR Directive in conjunction with its Recital 14, which states it is necessary to protect the rights of the authors with regards to public lending by providing for specific arrangements. This statement must be interpreted as establishing a minimal threshold of protection, which the Member States can exceed by setting additional conditions in order to protect the rights of the authors (at 61).

In our case, Dutch law required that an e-book made available for lending by a public library had been put into circulation by a first sale, or through another transfer of ownership, by the right holder or with his consent within the meaning of Article 4(2) of the InfoSoc Directive. The Court mentioned that Attorney General Szpunar had pointed out in his Opinion that if a lending right is acquired with the consent of the author, it may be assumed that the author’s rights are sufficiently protected, which may not be the case if the lending is made under the derogation provided by Article 6(1) (Opinion at 85). AG Szpunar concluded that therefore only e-books which had been made first available to the public by the author should be lent. The CJEU ruled that Member States may subject as condition to e-lending the fact that the first sale of the e-book has been exhausted in the EU by the right holder.

 

Third: May a copy of an e-book obtained from an unlawful source be lent?

Not surprisingly, the CJEU answered in the negative to this question, noting that one of the objectives of the RLR Directive, as stated by its Recital 2, is to combat piracy and that allowing illegal copies to be lent would “amount to tolerating, or even encouraging, the circulation of counterfeit or pirated works and would therefore clearly run counter to that objective” (at 68).

The Court did not answer the fourth question as it had been submitted only in the case the Court would rule that it is not necessary that the first sale of the e-books being lent had been exhausted in the EU.

This is a welcome decision since, as noted by AG Szpunar in his Opinion, it is crucial for libraries to be able to adapt to the fact that more and more people, especially younger ones, are now reading e-books instead of printed books.