EU General Court Clears Copyright Collecting Societies Of Antitrust Charges

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European copyright collecting societies are not engaged in a cartel but the European Commission was correct in finding that some of the provisions in their reciprocal representation should be barred, the EU General Court (GC) said in a 12 April ruling.

The case, which pits the International Confederation of Societies and Authors (CISAC) and 24 of its members against the EC, could be appealed to the EU Court of Justice (ECJ). CISAC said the decision proves its contention that it was not engaged in a conspiracy to restrict competition, and that it has already done away with the complained-of clauses.

Separately, the ECJ has been asked to tackle several key issues in a German matter involving standards-essential patents encumbered with a fair, reasonable and non-discriminatory (FRAND) licensing agreement.

No Antitrust Violation Found

The CISAC model reciprocal representation contract goes back to 1936, the General Court said. The ruling is here. The agreement its members sign non-binding and allows them to grant licences covering public performance rights of musical works not only in the offline world (e.g., concerts or radio) but on internet, cable or satellite broadcasts.

Under the model agreements, each collecting society agrees, reciprocally, to grant rights over its repertoire to all of the other collecting societies for the purpose of exploiting those rights in their respective territories, the court said. Under the network created by those reciprocal contracts, each collecting society can propose a worldwide portfolio of music to commercial users, but only for use in its own territory.

In 2000, RTL filed a complaint with the EC alleging that a CISAC member had refused to give it a European Community-wide licence for its music broadcasting services, the court said. In 2003, Music Choice Europe, which provides an internet radio and television broadcasting service, lodged a second complaint about the CISAC model contract.

In a 16 July 2008 decision in Case COMP/C2/38.698 – CISAC), the EC, without imposing a fine, said that the model contracts’ membership and exclusivity clauses violated EU competition law, the court said. Specifically, it found that the membership clauses restricted authors’ ability to affiliate freely with the collecting society of their choice, and that the exclusivity provisions effectively gave all collecting societies, in the territories in which they were established, absolute territorial protection regarding other societies regarding the grant of licenses to commercial users.

Moreover, the EC said, the collecting societies were engaged in a concerted practice by which each limited the right to grant licences relating to its repertory in the territory of another collecting society party to the agreement. It ordered the organisations to remove the membership and exclusivity provisions and stop acting as a cartel.

The GC, however, ruled that the EC did not provide enough evidence to prove the existence of a concerted plan to restrict competition. However, it rejected the collecting societies’ request to reject the EC decision on the membership and exclusivity clauses.

The EC “takes note” of the judgments, said Antoine Colombani, spokesman for Competition Commissioner Joaquín Almunia. The rulings confirm the EC’s findings that collecting societies were restricting competition by limiting authors’ ability to choose which society manages their copyrights, and that exclusivity clauses restrict competition, he told Intellectual Property Watch.

The EC “notes that the General Court did not endorse, as a matter of evidence, that finding that coordination among collecting societies had taken place,” Colombani said. The EC will “carefully analyse the Court’s findings before deciding on the next steps to be taken.”

“Major Victory” For Collecting Societies

The ruling is a “major victory for us,” CISAC Legal and Public Affairs Director Gadi Oron told Intellectual Property Watch. Collecting societies argued all along that there was no conspiracy to hamper competition, and the GC upheld that view, he said.

Moreover, Oron said, CISAC modified the complained-of membership and exclusivity provisions even before the 2008 EC decision, so didn’t appeal that part of the ruling. The GC decision is important because it recognises the ability of collecting organisation to protect their rights in foreign territories, he said. The EC never said territorial restrictions are barred, only that organisations can’t coordinate those restrictions, he said.

The annulment “does not mean a declaration of innocence,” Innocenzo Genna, an EU public affairs consultant specialising in telecom and internet issues, wrote on his radiobruxelleslibera blog. With regard to the existence of concerted practices, the GC was unconvinced of the evidence presented by the EC but that does not mean that the behaviour at issue is legitimate, he said. It will be up to the EC “to be more convincing” in the ECJ or to start another investigation to collect better evidence, he said.

Nevertheless, the EC decision forced some collecting societies to modernise and develop practices which previously were rare, such as multi-territorial licences, Genna wrote. Although the sector continues to be “rigid and delayed by historical legacies and interests,” there is no doubt that change has begun, he said.

That change is likely to come via legislation now under discussion in the European Parliament and Council to update rules governing collective management, Genna said. CISAC welcomes the directive because it will add confidence to the system, Oron said.

ECJ to Consider FRAND Patent Issue

Meanwhile, the EU high court has been asked to step into a case involving the intersection of EU and German competition and patent law, the Jones Day law firm said in a 10 April antitrust alert. The questions revolve around whether the holder of a FRAND-encumbered standards-essential patent is entitled to obtain an injunction against a business infringing its patent. The ECJ’s answers “may provide clarity to this hotly contested topic sooner than expected,” the firm said.

In most significant jurisdictions, the plaintiff in a patent infringement case can seek an injunction preventing the accused infringer from continuing to practice the inventions claimed in the patent, the alert said. Some defendants, however, have argued that when a patent is a standards-essential patent subject to a FRAND licensing commitment, the patent holder should be barred from obtaining injunctive relief, it said.

In a case involving a patentee seeking to enforce a patent relating to the Long Term Evolution (LTE) mobile telecommunications standard, the Regional Court of Düsseldorf has asked the ECJ to clarify aspects of the FRAND defence. The EC is investigating several FRAND antitrust cases, but high court action could fast-forward the legal discussion on the issue, Jones Day said.

Dugie Standeford may be reached at info@ip-watch.ch.

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