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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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Standards and FRAND Terms in the Post Huawei World

By Giuseppe Colangelo

The judgment of the European Court of Justice (CJEU) in Huawei/ZTE (Case C-170/13)
marked a milestone in the patent war which has characterized standardization activities in the last decade. The CJEU identified the precise steps which standard essential patents (SEPs) owners and users have to follow in negotiating fair reasonable and non-discriminatory (FRAND) royalties. Compliance with this code of conduct will shield IPRs holders from the scrutiny of competition law and, at the same time, will protect implementers from the threat of an injunction and the consequent disruptive effect on sales and production.

In primis, the patent holder must inform the SEPs user about the alleged infringement and make a specific and written FRAND offer, provided the latter has shown willingness to obtain a license on fair and reasonable terms. The exact amount of the royalty and the way in which it has been calculated should be specified in the offer. In case of refusal, the implementer must promptly propose a counter-offer that complies with FRAND requirements. If such counter-offer is also rejected, the alleged infringer must provide appropriate security to continue using the patents, either by providing a bank guarantee or by placing the requisite amount on deposit. In addition, the parties have the option to request that the royalty level be set by an independent third party decision without delay. Patent owners will instead be granted an injunction if the implementer, while continuing to use the patent in question, have not diligently responded to the first licensing offer, in accordance with recognized commercial practices in the field and in good faith, which is a matter that must be established on the basis of objective factors and which implies that there are no delaying tactics. Furthermore, with regard to liability for past acts of use, the CJEU also explained that Article 102 TFEU does not prohibit the SEPs owner from bringing an action for the award of damages or the rendering of accounts. The above requirements and considerations do not, however, deprive the potential licensee of the right to challenge the validity and essentiality of the patent at issue.

Despite the CJEU’s efforts, many shadows still loom on the horizon of the EU standard-setting community. In such a complex context, the recent activity by certain national courts in filling the gaps left by the CJEU and shedding light on some of the thorniest questions is undoubtedly welcome, and deserves the utmost consideration. Among these decisions, the UK judgement Unwired Planet v. Huawei[1] recently delivered by Mr. Justice Birss is of utmost importance.

 

The UK dispute Unwired Planet v. Huawei

Unwired Planet, a U.S. based patent assertion entity that holds a worldwide patent portfolio which includes numerous SEPs to various telecommunications standards, claimed that Huawei was an unwilling licensee. Huawei counterclaimed that Unwired Planet was abusing its dominant position by offering to license its entire global portfolio (SEPs and non-SEPs) and by demanding royalty rates higher than FRAND ones.

On 5 April 2017, the High Court of England and Wales delivered its judgement.

Justice Birss addressed several important topics. First, Birss stated that only one set of licensing terms can be ultimately considered FRAND in a given set of circumstances. From this perspective, the judge disregarded the view of those authors, U.S. judges (e.g. Robart in Microsoft v. Motorola) and perhaps even the CJEU in Huawei, according to whom FRAND may well comprise a range of terms. Indeed, although the Huawei case did not deal with FRAND pricing, yet it acknowledged that parties can make divergent FRAND offers and counter-offers, thereby confirming that there is no unambiguous FRAND point and that several distributional FRAND prices exist.

Furthermore, as a consequence of the single FRAND rate, Birss found that, during the negotiation, the parties could make offers that would not be FRAND. An obligation focused only on making FRAND offers is considered unrealistic since a process of fair negotiation will usually involve some compromise between the parties’ rival offers: if the standard setting organization demands that offers made by a patentee must themselves consist of FRAND terms, then that would condemn patentees to always end up with negotiated rates below a FRAND rate. Therefore, according to the UK Court, it makes much more sense to interpret the FRAND obligation as applicable primarily to the finally agreed terms rather than to the offers.

It seems that Birss aimed to reduce the relevance of the Huawei decision (and of the competition law, in general) also relatively to another point. After recalling the purpose of a FRAND commitment and its alleged contractual nature, the UK judgment concluded that the contractual commitments submitted to the standard setting organization (ETSI) are stricter than antitrust provisions. Indeed, since competition law fines only excessive prices, a rate can be in line with antitrust rules even if it is higher than the FRAND benchmark. In sum, according to the English Court, FRAND commitments can be enforced under contract law without recourse to competition law.

Turning to the process of negotiating FRAND licenses, with respect to the type of behavior that can be considered FRAND, the Court stated that making extreme offers and taking an intransigent approach is not FRAND. In this regard, Huawei was considered unwilling because it insisted on having an offer for just a UK license (instead of a worldwide one).

Moreover, Birss provided useful insights about the determination of FRAND rates. An appropriate way to establish the FRAND royalty would be to determine a benchmark rate governed by the value of the patentee’s portfolio: counting patents and making reference to existing comparable licenses are key steps of the determination process. In the High Court’s words, a patentee who refuses to accept those terms would be in breach of its FRAND undertaking. With respect to the non-discrimination element, the Court rejected a “hard-edged” approach capable of applying to reduce a royalty rate (or adjust any license term in any way) which would otherwise have been regarded as FRAND. On the contrary, the Court endorsed a “general” approach, which requires that rates cannot differ based on the licensee but only on the value of the portfolio licensed.

The UK judgement demonstrates that after Huawei there are still several pending questions. It is not surprising that the European Commission has recently intervened to announce a Communication in order to fill the gaps by complementing existing jurisprudence through best practice recommendations.[2]

[1] [2017] E.W.H.C. 711 (Pat).

[2] European Commission, Roadmap towards a Communication on ‘Standard Essential Patents for a European digitalised economy’, 2017, 2, available at https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-1906931_en.

The Italian Competition Authority Authorizes the Acquisition of Two Data Center and Cloud Computing Services Companies

By Valerio Cosimo Romano

With the decision No. 46741, published on 2 October 2017, the Italian Competition Authority (“ICA”) authorized the acquisition of Infracom Italia S.p.A. (“Infracom”) and MC-Link S.p.A. (“MC-Link”) by F2i SGR S.p.A. (“F2i”).

 

The Parties

F2i is an asset management company, owned by institutional investors, which controls two closed-end investment funds and mainly invests in Italian infrastructures. Infracom is a company which provides (i) data center and cloud computing services, which are part of the broader ICT market; (ii) telecommunication services, both wholesale and retail; and (iii) enterprise resource planning services. MC-Link is a publicly listed company which mainly offers data center services (inter alia housing, co-location and server renting).

The transaction was structured as follows: 2i Fiber, a newly incorporated company whose 80% of shares are owned by one of two of F2i’s funds, acquired the exclusive control of Infracom (and, consequently, indirect control of its subsidiaries Softher S.à.r.l. and Multilink Friuli S.r.l., and 89% of MC-Link), and of MC-Link.

 

Relevant markets

The transaction involves the information and communications technology (“ICT”) sector. Coherently with the European Commission’s precedents, the Authority determined that the ICT services market shall be considered individually, without further segmentation. The market separation in smaller divisions, for example co-location provided by data centers, would be unjustified, given the differentiation within the ICT offer itself. Indeed, the ICT offer is usually tailored upon very specific needs of the market base and therefore may change and spread to other markets very easily. The ICA specified that even by ‘unbundling’ the relevant market in smaller segments, there would be no dominance by the new entity.

The ICA further added that, under a geographical point of view, data center and cloud computing services have specific economic characteristics confined to a local market, generally defined by a metropolitan city, given that the client base tends to demand these services within 50 kilometers from its activity. This is due to the fact customers need a signal latency not exceeding certain thresholds, and this is why companies operating in this sector tend to position their facilities in the proximity of urban areas.

According to the ICA, the transaction also involves marginal effects on two other markets: i) wholesale access to fixed public telephone network services; and ii) retail telecommunication on fixed network services, where Infracom owns marginal quotas. However, such markets are generally characterized by the presence of an incumbent operator (Telecom Italia S.p.A.) holding a preeminent position.

 

ICA’s conclusions

ICA concluded that the transaction will not have an impact on competition in the markets of telecommunications and ICT services, with reference to data center and cloud computing services. The Italian Authority for Communications Guarantees (AGCOM) concurred with ICA’s opinion. The transaction was therefore authorized.

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.

Processing of Personal Data – ECJ on Directive 95/46/EC in the Case “Peter Puškár”

By Maria E. Sturm

On 27 September 2017 the ECJ issued its preliminary ruling on the case Peter Puškár vs. Finančné riaditel’stvo Slovenskej republiky, Kriminálny úrad finančnej správy (C-73/16) which gives helpful guidelines on the lawfulness of the processing of personal data by public authorities.

  1. Case

The financial authorities of Slovakia have drawn up a list of persons which are considered to be front men for several companies. In detail, the list contains the names of the persons, their tax identification number, their national identification number, and the companies they are associated with. Peter Puškár is one of those persons and wanted to be deleted from this list. The case has several facets, touching questions regarding Data Protection Directive 95/46/EC, but also the Charter of Fundamental Rights of the EU. Therefore, the Supreme Court of the Slovak Republic requested a preliminary ruling of the ECJ under Article 267 TFEU.

 

  1. Questions

The Supreme Court of the Slovak Republic posed four questions:

  • The first question is a procedural one, asking if an obligatory pre-trial proceeding is admissible in cases concerning the procession of personal data.
  • The second question, also of procedural nature, covers the problem of the admissibility of the list as evidence.
  • The third question finally asks, if such a list is a legal form of processing personal data.
  • The fourth question refers to the relation between the European Court of Human Rights and the Court of Justice in cases of differences between the case-laws. However, the ECJ regarded this questions as inadmissible because of its hypothetical nature. Therefore, it will not be further covered in this article.

 

III. Ruling

  1. On Question n°1

Question n° 1 refers to Art. 22 of directive 95/46/EC. This articles requires Member States to provide a judicial remedy for any breach of the rights guaranteed with regard to the processing of data. So the question is: does an obligatory pre-trial proceeding harm this right to judicial remedies, as it makes the whole process more complex and more expensive? The Slovak administrative authorities argued, that a pre-trial proceeding offers the chance for a quick resolution, if the administration follows the argument of the complainant. Furthermore, unexpected lawsuits can be avoided and the ensuing lawsuit will be more efficient, because arguments of both parties are already documented. ECJ ruled, that if the pre-trial is not too long and not too expensive and there is no obvious discrepancy between the advantages and disadvantages of the pre-trial proceeding, it does not harm Art. 22.

 

  1. On Question n° 2

The Slovak financial authorities claimed, that the list cannot be admitted as evidence, because it is confidential and for internal use only. This could be a restriction of the right to an effective remedy according to Art. 47 of the Charter of Fundamental Rights of the EU. Such a restriction can only be legal, if it is regulated by law, respects the essential content of the right, is proportionate and conforms to accepted aims of the common welfare of the EU. This is highly questionable in this case, as Art. 12 of directive 95/46/EC guarantees every data subject the right of access to the processed data and Art. 10 and 11 guarantee that information about processed data is provided to data subjects. Therefore, Mr. Puškár must have access to the list, which fulfills the definition of personal data according to Art. 2a) of the directive, and the financial authorities have no reason to withhold it during the lawsuit.

 

  1. On Question n° 3

The third question finally refers to the substance of the directive and requires a definition of the legality of processing personal data in such a list. Being part of this list can harm the reputation of the person as well as the presumption of innocence. Furthermore, it can harm the entrepreneurial freedom of the companies related to this person. On the other hand, according to Art. 7e) of the directive, data can be processed, if it is necessary for the performance of a task carried out in the public interest or in the exercise of official authority. The goal intended by setting up this list was to ensure tax collection and to avoid tax fraud, both legal public tasks. Furthermore, the list has been set up by those authorities who are in charge of these tasks. This is important, as Art. 6 I b) requires the explicit connection between the aim and the task. However, taking into account the disadvantages for the affected persons, the list is only admissible, if there is sufficient indication for the suspicion.

It is now up to the Slovak courts to re-examine the case and see if the financial authorities worked within these guidelines set up by the ECJ.

 

  1. Relevance

Directive 95/46/EC has been replaced by the General Data Protection Regulation (Reg 2016/679; see also TTLF Newsletter of February 3, 2017) which applies from May 25, 2018 on. However, the articles in question in this verdict all form part of the new regulation with regard to content:

  • Remedies required in Art. 22 Directive 95/46/EC, are now required by Art. 79 I Reg 2016/679.
  • The right of access and information according to Art. 10, 11, 12 Directive 95/46/EC can now be found in Art. 13, 14, 15 Reg 2016/679.
  • Art 6I b) Directive 95/46/EC is now Art. 5 I b) Reg 2016/679, and Art. 7e) Directive 95/46/EC is now Art. 6 I e) Reg 2016/679.

 

Therefore, the guidelines for interpreting the directive, set up by the ECJ in this verdict will still be applicable to the new regulation, which enters into force in 2018.

Dow/DuPont Merger Cleared by EU Commission

By Maria E. Sturm

On March 27, 2017 the EU Commission cleared the merger of two U.S. chemical companies – The Dow Chemical Company (Dow) and E.I. du Pont de Nemours and Company (DuPont) according to the EU Merger Regulation. The Commission opened the investigation already in August 2016. The reason for the merger being cleared only now, were strong concerns of the EU Commission, which is the highest antitrust regulating authority in the EU. The EU Commission has the competence and duty to control mergers that exceed the thresholds laid down in Article 1 of the Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (EU Merger Regulation). The merger creates the largest crop protection and seed company in an already highly concentrated market. The field of business of Dow and DuPont is particularly sensitive, as farmers strongly depend on seeds and crop protection at affordable prices.

There were three main issues of concern: The EU Commission expected (1) higher prices, (2) less choice for consumers and (3) substantially less innovation.

Both companies operate in two areas: pesticides and petrochemical products.

 

Pesticides

Concerns:

Pesticides comprise herbicides, insecticides and fungicides. Due to the very high market share of Dow and DuPont, after their merger hardly any competitors would be left on the market. This development would most probably lead to higher prices and less choice for consumers. Furthermore, the merger would have detrimental effects on the innovation efforts in the pesticide branch. Globally, only five enterprises (BASF, Bayer, Syngenta, Dow and DuPont) participate in the research and development activity with regard to pesticides, because only those enterprises have the capacity to do large scale research on all three fields of pesticides. Other competitors in this area have no or only very limited research and development capacities and therefore cannot trigger innovation activity on the market. However, innovation is essential to develop pesticides that are less nocuous, more effective or can help when vermin have developed resistances.

Solutions:

Dow and DuPont agreed on selling the worldwide herbicide and insecticide production of DuPont, the worldwide research and development capacities of DuPont and the exclusive license for a DuPont fungicide for rice crop for the European market.

 

Petrochemical products

Concerns:

Dow and DuPont are both in the acid copolymers business. Their merger would reduce the number of competitors in this business from four to three. Furthermore, DuPont has a dominant position in the ionomers business.

Solutions:

Dow sells both its production facilities in Spain and the United States. Furthermore, it terminates its contract with a ionomer provider from whom Dow received the ionomers it sold to its customers.

Dow and DuPont were able to clear initial concerns of the EU Commission about nematicides and seeds. These areas are therefore not affected by the merger decision.

Further mergers are planned in the agro-chemical sector. However, due to the “priority rule” the commission assesses every merger in the order of its notification according to the current market situation. It will be interesting to see, how later mergers will be affected by the Dow/DuPont decision.

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.