The Court of Justice of the European Union (CJEU) issued on Tuesday 4th October its much anticipated ruling in the joined cases of Football Association Premier League v QC Leisure and Karen Murphy v Media Protection Services Limited, on EU law questions referred to it by the English High Court.  The Advocate General's Opinion of February 2011 recommended the application of the EU free movement of services and competition rules so as to prohibit national legislation and contractual restrictions which prevent the importation of foreign decoder devices from another member state to enable decryption and viewing of a satellite TV service in the member state of importation.  The CJEU has followed the recommendation of the Advocate General on most of the important points, stressing the integrity of the EU internal market even more clearly.   However, the CJEU found that the screening in a public house involves a transmission to a new and distinct public, which falls within the rights holders' rights.  It remains to be seen how the English High Court will apply this aspect of the ruling to the facts of the case.

The judgment does not affect the ability under EU law of sports rights holders such as The FA Premier League (FAPL) to grant exclusive licences for the transmission of live football.  However, it prevents such rights holders being able to invoke national legislation or contractual clauses concerning territorial limitations, which prevent the importation of the decoder equipment needed to view the satellite transmissions in other member states.  The judgment prevents or seriously limits the ability of sports rights holders to prevent a secondary market for "imported" transmissions in other member states, including screenings in public houses, by means of foreign decoder cards.

The judgment is essentially in two parts, concerning first the rules relating to the reception of encrypted broadcasts from other member states, and second, rules relating to the use of the broadcast once they are received. 

A. Rules concerning reception of encrypted broadcasts from other member states

Foreign decoders are not "illicit devices"

The CJEU concluded, as expected, that foreign decoding devices are not "illicit devices" within the meaning of the EU Conditional Access Directive merely because they have been procured by means of a false name and address or in breach of a contractual requirement of use only for private purposes.  Therefore their importation cannot be excluded on this basis. 

The EU free movement rules

The CJEU then addressed the enforceability under EU law and in particular the EU free movement of services rules (Article 56 of the Treaty on the Functioning of the European Union ("TFEU")) of provisions of national law preventing the importation of foreign decoder devices.  The CJEU stated that the free movement of services rules rather than the free movement of goods rules are applicable, because although the decoding devices are goods, their use is secondary to the reception of the encrypted broadcasting services.   The key issue was whether the rights holders' intellectual property rights justified the enforcement of the national legislation against imported foreign decoder devices, despite the EU free movement rules. 

The CJEU stated that sporting events cannot themselves be protected under copyright and cannot be classified as works eligible for protection within the meaning of the EU Copyright Directive.  It is permissible for a member state to protect sporting events, where appropriate by means of intellectual property, or by recognising protection conferred on those events by agreements concerning the making available of audiovisual content of such events, but it is for the national court to establish whether the relevant national legislation confers such protection.  Such legislation, where it applies, is capable in principle of justifying a restriction on the free movement of services.  However, where a premium is paid to rights holders to guarantee absolute territorial exclusivity such as to result in artificial price differences between partitioned national markets, such results are irreconcilable with EU internal market requirements.  The CJEU concluded that prohibitions on using foreign decoding devices cannot be justified by reference to the protection of intellectual property rights. 

The CJEU also concluded that the "closed period" rule preventing live football transmissions on Saturday afternoons, does not justify a prohibition on imports of decoder devices.  This is because the "closed period" rule can be respected by means of contractual limitations in broadcasting licence agreements preventing broadcasting of Premier League matches during the closed periods. 

The CJEU also stated that the use of false names and addresses to obtain decoder cards, and the use of such decoders for commercial rather than the authorised private purposes, do not affect these conclusions because the risks involved are no different in the case of cross-border supply of decoders to those for the internal, domestic supply of decoders within the same member state where the broadcasts are made.

Territorial restrictions in licence agreements: EU competition law

The CJEU concluded that territorial restrictions in broadcasting licence agreements requiring the broadcaster not to supply decoding devices outside of the contract territory, constitute absolute territorial restrictions which are inconsistent with Article 101(1) TFEU (the prohibition on restrictive agreements) as being a restriction by object.  By their nature such absolute territorial restrictions were stated by the CJEU not to be capable of benefitting from the exceptions criteria in Article 101(3) TFEU (which enables the prohibition on restrictive agreements to be declared inapplicable where, broadly, efficiency gains outweigh the disadvantages of the restrictions concerned). 

B. Rules relating to the use of the broadcasts once received

The CJEU ruled on two further important points relating to the exploitation of the FAPL's rights.  The CJEU's examination specifically focussed on the FAPL's copyright in certain works exploited within the broadcasts, in particular the opening video sequence, the FAPL anthem, pre-recorded highlights films and various graphics.

Exemption from need for rights holders' authorisation

First, the CJEU held that acts of reproduction performed within the memory of a satellite decoder and on a television screen can be carried out without the authorisation of the copyright holders concerned, pursuant to the EU Copyright Directive.  This is on the basis of a defence to the reproduction right in Article 5(1) of that Directive, which allows a reproduction which is temporary, transient or incidental, an integral part of a technological process, is a lawful use of a work, and has no independent economic insignificance.  On the latter point, since the temporary acts of reproduction were not capable of generating an additional economic advantage beyond that derived from the reception of the broadcast, the criterion was satisfied and the exemption applied.

"Communication to the public"

The CJEU decided that screenings to customers of public houses amounted to a "communication to the public" within the meaning of the Copyright Directive (Article 3(1)).  This was the opposite conclusion to that reached by the Advocate General, and was based inter alia on the fact that the customers present in the public house were an additional public to those considered by the authors when they authorised to the broadcasting of the works.  This was also stated to be in accordance with authors' rights to appropriate reward for the use of their works and it seems to indicate that FAPL as rights holder has an additional right to authorise and charge a fee to proprietors of public houses in respect of screenings to pub customers, despite the free circulation of the decoder devices.

Conclusion

The judgment will clearly have an impact on decisions concerning the licensing of satellite broadcasting of major sports events.  However, the full effect will become clear when the High Court gives its judgment applying the CJEU ruling to the facts of the case. 

The extent to which the judgment leads to an approximate equalisation of rights values in different EU member states will depend to a large extent on the extent to which trade in imported decoder devices will flourish and the willingness of both domestic and commercial premises owners respectively to utilise such devices.  It remains to be seen to what extent rights holders will adopt a policy of EU-wide licensing as a response to the judgment.

At least in relation to private users, it can be expected that a degree of protection can be sustained by rights holders through limiting the licensees' broadcasting rights to a particular language version.  This was expressly acknowledged as a possibility by the Advocate General, and though not mentioned in the judgment, still seems to be a possible solution.   Possibly also, rights holders could consider a policy of licensing broadcasters to offer the services only to private and not commercial users, though this could be commercially disadvantageous and could be difficult to enforce.

Further, whilst it was not expressly considered in the judgment, rights holders could consider utilising territorial limitation clauses preventing active sales as opposed to an absolute restriction also covering passive sales of decoder devices outside the licensed territory.  This may only give limited commercial protection but at least might enable territorial licensing arrangements for which the Article 101(3) exceptions criteria could be claimed.

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