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Apple and Qualcomm Proceeding

By Nicole Daniel

In January 2017 Apple filed suit against Qualcomm over its allegedly abusive licensing practices regarding wireless patents.

Apple filed patent, antitrust and breach of contract claims against Qualcomm; this could result in damages of billions of dollars. Apple’s suit comes after recent legal challenges against Qualcomm filed by the U.S. Federal Trade Commission in federal court and a class action by smartphone buyers. Furthermore, Korean authorities levied their own $854 million penalty and China’s National Development and Reform Commission extracted a penalty amounting to nearly $1 billion in 2015. Also in 2015 the European Commission sent statements of objections to Qualcomm.

Apple alleges that Qualcomm abused its monopoly in baseband processors that power both the iPad and the iPhone and broke its promise to license its standard essential patents at FRAND, i.e. fair, reasonable and non-discriminatory, rates. Qualcomm breached its FRAND obligations by selling chipsets powering smartphones and tablets and separately licensing standard-essential patents. Apple further alleges that Qualcomm refused to sell chipsets to customers unless they first licensed their standard-essential patents. This allegation is central to the Federal Trade Commission’s case too as well as Apple’s allegation that Qualcomm does not licence its standard-essential patents to competing chipset manufacturers. Tying the chipsets and licenses to cellular technology illegally strengthened Qualcomm’s monopoly and eliminated competition. Another allegation by Apple is that Qualcomm threatened customers who purchased chipsets from competitors with less favorable license and royaltyi terms.

Not only did Qualcomm charge inflated royalties for its patents but it also engaged in allegedly intimidating business practices. For example, Qualcomm allegedly tried to force Apple to lie to the South Korean antitrust enforcer in exchange for $1 billion which Qualcomm was obliged to pay anyway. Apple further states that because it provided evidence in antitrust investigations against Qualcomm in the U.S. and Korea, Qualcomm, as retribution, withheld $1 billion that it owed to Apple. Apple now wants damages for having been overcharged billions of dollars, enjoin Qualcomm from engaging in further violations of the law and declaratory relief holding that Apple does not infringe on a number of patents owned by Qualcomm. Apple also asks the court to determine the proper FRAND rates.

Qualcomm countered by calling Apple’s allegations “baseless” and accusing its opponent of encouraging the regulatory “attacks” on Qualcomm. Also the antitrust claims are driven by commercial disputes and Qualcomm will continue to defend its business model.

Furthermore, Qualcomm learned in January 2017 that an Apple subsidiary filed two complaints against Qualcomm in the Chinese intellectual property court. The first complaint regards inter alia violations of Chinese anti-monopoly law by offering excessive royalty terms on patents and chipsets whereas the second complaint regards a refusal to provide to Apple a royalty offer for cellular standard essential patents consistent with FRAND terms.

In April 2017 Qualcomm filed an answer and counterclaims in California federal court. In its filing Qualcomm detailed the value of the technologies it has invented and alleged that Apple failed to engage in good faith negotiations for licensing 3G and 4G essential patents on FRAND terms. The filing further outlines that Apple allegedly breached and mischaracterized both agreements and negotiations. Apple further encouraged regulatory attacks in various jurisdictions and did not utilize the full performance of Qualcomm’s modern chips in the iPhone 7. Apple allegedly also misrepresented the disparity in performance between iPhones using competitor-supplied modems and Qualcomm modems. Qualcomm was even threatened by Apple to prevent it from making any public comparisons about the superior performance of iPhones powered by Qualcomm.

Also in April 2017 Apple published a written statement stating that it has chosen to withhold patent royalties owed to Qualcomm by its contract manufacturers because over the course of the last five years Qualcomm has refused to negotiate fair terms.

It remains to be seen how the proceedings in this case continue.

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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.

Samsung Wants New Trial in the Wake of the Recent Supreme Court Decision on Design Patents

By Nicole Daniel

In April 2017 Samsung filed an opening brief asking to vacate a design-patent judgment for $399 million and order a new trial on damages regarding their eleven smartphone models which have been found to infringe an Apple design patent.

According to Samsung the recent Supreme Court’s decision on design patents invalidates the legal premise on which the damages were tried in the earlier trials and further eliminates the legal basis for the $399 million award amounting to the total profit Samsung made on its phones.

This development comes after an unanimous Supreme Court decision made in December 2016. The Supreme Court ruled that the term “article of manufacture” in Section 289 of the Patent Act could apply to a component of a finished and not just the whole product.

Section 289 entitles a design patent holder to all profits derived from the “article of manufacture” that infringed the patent. The Supreme Court remanded a $399 million judgment against Samsung on three iPhone design patents back to the U.S. Court of Appeals for the Federal Circuit. According to the Supreme Court ruling interpreting Section 289 to only cover the end product sold to a consumer is a too narrow meaning of the phrase. “Article of manufacture” is broad enough to cover the final product as well as a component of that product. This decision follows the oral arguments held in October 2016 where Apple, Samsung and the U.S. Department of Justice (participated as amicus in the case) agreed that it was incorrect by the Federal Circuit to hold that the term “article of manufacture” always has to be synonymous with the final product sold to the consumers.

From the ruling it follows that a single component of a device featuring multiple components, such as a smartphone, could be the basis for determining damages for infringing a design patent.

Samsung therefore argued that this Supreme Court ruling requires vacating the $399 million award and scheduling another trial for damages. In February 2017, the U.S. Court of Appeals remanded the case back to U.S. District Judge Lucy Koh, saying that the district court was in the best position to decide on the arguments of Apple and Samsung over the need for further trials.

In contrast to Samsung, Apple is of the opinion that no additional proceedings are necessary after the Supreme Court ruling. Apple argues that the Supreme Court’s decision did not identify any problems with the jury verdicts in 2012 and 2013 in the patent trials. Also Samsung never presented evidence or even argued that “article of manufacture” applied to anything other than the entire phone. Accordingly, no further proceedings are necessary as the ruling did not serve to question any aspect of the Court’s prior decisions. Further, the Supreme Court merely resolved a narrow question on the interpretation of the term “article of manufacture” which arose out of the Federal Circuit’s reading of this term in its original opinion. The Federal Circuit had interpreted the term in question as relating only to a finished product.

It also has to be noted that in March 2016 Judge Koh decided to delay a scheduled third trial in the case dealing with damages for Samsung’s smartphones found to infringe Apple’s trade dress. This decision by Judge Koh was made after the Supreme Court agreed to hear Samsung’s appeal on design patents. Therefore, a third trial in this case will take place anyway. For now the stay remains in place.

Judge Koh now scheduled a hearing for June 15 on the need for a further trial in the wake of the Supreme Court ruling and ordered a case management conference for July 5.

Ninth Circuit: Using a Trademark as a Verb Is Not Automatically Generic Use

By Marie-Andrée Weiss

The United States Court of Appeals for the Ninth Circuit ruled on 16 May 2016 that ‘google’ is not a generic term for a search engine, and thus the famous California company did not suffer the costly indignity of having its trademarks cancelled through genericide. The case is Elliott v. Google, 2:12-cv-01072.

Plaintiffs had registered 763 domain names, each incorporating the word ‘google’ along with the name of a another brand (googledisney.com), of a person (googlebarackobama.net) or a place (googlemexicocity.com). This business plan did not fare well with the famous search engine company, which successfully asked the National Arbitration Forum to transfer all these domain names to Google.

Plaintiffs then filed a suit in the United States District of Arizona claiming that ‘Google’ “is, or has become, a generic term universally used to describe the action of internet searching with any search engines” (Complaint, p. 2), and asked the court to cancel Google’s trademarks. Indeed, the Lanham Act, 15 U.S.C. § 1064(3), provides the right to petition for the cancellation of mark if it “becomes the generic name for the goods or services, or a portion thereof, for which it is registered.”

The parties filed cross-motions for summary judgment on the issue of whether the GOOGLE marks were generic: while Plaintiffs claimed that Google is a generic term because a majority of the public use it as a verb, Google argued that use of a trademark as a verb use is not automatically generic use. On 11 September  2014, the United States District of Arizona granted summary judgment for Google. Plaintiffs appealed to the United States Court of Appeals for the Ninth Circuit, which affirmed.

 

The Google trademarks

As mentioned in the original complaint, ‘Google’ comes from the term ‘googol,’ meaning a 1 followed by 100 zeros. Google holds a trademark registration for GOOGLE in class 9 for “computer hardware; computer software for creating indexes of information, indexes of web sites and indexes of other information resources” and another one in class 38 for  “[p]roviding electronic mail and workgroup communications services over computer networks; providing multiple user access to proprietary collections of information by means of global computer information networks.”

 

Generic trademark and genericide

Needless to say, if a mark becomes generic, it is quite costly for the company that invested a lot in developing goodwill towards its brand.  A generic term cannot serve as a trademark because it cannot serve as identifying the source of a product or service. Several famous marks, among them aspirin, cellophane, and thermos, fell victim of their success and became generic because they were used by the general public to designate the genus of their product, not just a particular brand. This is ‘genericide’.

 

The primary significance test

Plaintiffs had the burden of proving the genericide since they applied for the cancellation of the GOOGLE trademarks, and a registered trademark is presumed to be valid. They argued on appeal that the district court had misapplied the primary significance test, which was coined by the Supreme Court in its 1938 Kellog Co. v. National Biscuit Co. case:  a mark is not generic if “the primary significance of the term in the minds of the consuming public is not the product but the producer.” As noted by the Ninth Circuit, quoting Ty Inc. v. Sofbelly’s Inc., “a trademark only becomes generic when the “primary significance of the registered mark to the relevant public” is as the name for a particular type of good or service irrespective of its source.”

Plaintiffs argued that the district court had framed the inquiry as to whether the primary significance of ‘google’ to the consuming public is a generic name for search engines, whereas it should have inquired whether the public primarily uses ‘google’ as a verb. The Ninth Circuit disagreed with this argument for two reasons: genericide always relates to a particular good or service and using a trademark as a verb is not automatically generic use.

 

Genericide always relates to a particular good or service

For the Ninth Circuit, the District Court “properly recognized the necessary and inherent link between a claim of genericide and a particular good or service” (p. 9). The Court reasoned that failing to consider this would prevent some arbitrary marks to be protectable, giving as example IVORY which is arbitrary as applied to soaps, but would not be so for product made from the tusks of elephants.

The Ninth Circuit found that Plaintiffs’ “evidence was “’largely inapposite to the relevant inquiry under the primary significance test because [the Plaintiffs] ignor[e] the fact that a claim of genericide must relate to a particular type of goods or service’” (p. 13).

 

Using a trademark as a verb is not automatically generic use

Also, “verb use does not automatically constitute generic use” (p. 10). Plaintiffs had argued that a word can only be used as a trademark if it is used as an adjective. The Ninth Circuit disagreed, noting that it had found in Coca-Cola Co. v. Overland, Inc. that the mere fact that customers ordered “a coke” did not prove what they were thinking, a mark or a cola beverage, and more evidence was required about the customer’s inner thought process. Therefore, the use of a trademark as a noun may or may not be using it as a trademark (p. 11).

The primary significance test directed plaintiffs to provide evidence that that the primary significance of the GOOGLE trademarks is a general name for search engines, not a trademark identifying a particular search engine. The Ninth Circuit agreed with the district court which had found that, while the verb ‘google’ is indeed used to refer to searching on the internet, regardless of the search engine used, this fact alone cannot support a jury finding of genericide under the primary significance test, as it does not prove “how the public primarily understands the word itself, irrespective of its grammatical function, with regard to internet search engines” (p. 14).

 

How to prove that a mark has become generic

Plaintiffs also argued on appeal that the district court impermissibly weighted the evidence presented by Plaintiffs when granting summary judgment to Google. The Ninth Circuit disagreed, because, while Plaintiffs’ had presented admissible evidence that the majority of the public used ‘google’ as a verb, this was not enough to survive summary judgment, as it cannot alone prove genericide.

Plaintiffs had presented three surveys as evidence. Two were excluded by the district court because they had been conducted by Plaintiffs’ counsel, and “a valid survey design typically requires graduate training or professional experience in survey research” (p. 15). The third survey was a “Thermos survey,” that is a survey using open-ended questions, in our case, asking respondents how they would ask a friend to search something on the internet. The majority answered by using ‘google’ as a verb, and the survey was admitted as evidence that a majority of the public uses google as a verb meaning searching the internet.

Plaintiffs also gave examples of alleged generic use of ‘google’ by media and consumers, but they failed to convince both the district court and the Ninth Circuit, because Plaintiffs did not provide evidence that the use was indeed generic in the mind of the media and the consumers.

Plaintiffs had also offered expert testimony by three experts who all were of the opinion that ‘google’ is generic when used as a verb. However, this finding alone is not enough to prove genericide. Plaintiffs’ dictionary evidence did not prove either that ‘google’ is a generic name for internet search engines, only proving it is generic when used as a verb.

Plaintiffs also tried to prove that Google itself was using ‘google’ in a generic sense, presenting as evidence an email from Google cofounder Larry Page encouraging its recipients to “keep googling!” Generic use of a mark by its holder can support a finding a genericide, but the email was found by the court to be yet another example of the use of ‘google’ as a verb and did not prove that Larry Page had a particular search engine in mind (p. 19).

Finally, Plaintiff claimed that there was no efficient alternative for ‘google’ as a name for the act of searching the internet, but the Ninth Circuit drily noted that Google’s competitors do not use ‘google’ to refer to their own services (p.20).

‘Google’ may have become a verb, but this alone does not prove that GOOGLE is a generic mark. Keep googling.

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.