Free movement of occasionally infringing chairs: IP trumps the level playing field

Out of deference to Bauhaus's copyright
sensitivities, we bring you not a Bauhaus
but a "bow-wow" house, complete with
German shepherd ...

Today Advocate General Jaaskinen gave the Court of Justice of the European Union the benefit of his Opinion in Case C-5/11 Criminal proceedings against Titus Donner, a reference for a preliminary ruling from the Bundesgerichtshof, Germany.

In short, Titus Donner, a German national, was involved in the distribution of Bauhaus furniture which was reproduced by an Italian company Dimensione, whereby furniture was delivered from Italy to a warehouse in Germany from which Donner’s company, Inspem, delivered them to local purchasers. After the public prosecutor’s office brought charges of commercial exploitation without permission of works protected by copyright, Donner paid a fine of EUR 120,000 and the Amtsgericht München decided to take no further action.

Subsequently Dimensione acquired a warehouse in Italy. Each item it sold was marked with the name, address or order number of the person who had ordered it. Under the conditions of sale, purchasers had to make their own collection arrangement. However, if they couldn't or didn't want to, Dimensione advised them to contact Inspem. Dimensione’s advertising material stated that the purchasers would be acquiring the items in Italy, but would only pay for them upon delivery in Germany. Dimensione sent its invoices directly to the purchasers. When collecting the items, Inspem’s drivers would pay Dimensione for them, securing reimbursement from the purchaser upon delivery in Germany, along with their delivery fee. In the event that a purchaser declined to pay, Inspem would return the items to Dimensione and would be fully reimbursed.

Under the contract between Dimensione and its customers, which was governed by Italian law, ownership passed in Italy upon individualisation of the item sold to a named customer at Dimensione’s warehouse. In contrast, under German law the transfer of ownership only occurs when the purchaser possesses the goods and enjoys the de facto power to dispose of them -- as occurred in Germany when the buyers received the items from Inspem’s drivers against payment.

A fresh prosecution in respect of this new arrangement led to Donner's conviction before the Landgericht München II of aiding and abetting the prohibited commercial exploitation of copyright protected works. The court also found that Dimensione had distributed copies of works by putting the items into circulation. Donner appealed to the Bundesgerichtshof, arguing that the prosecution amounted to a breach of the Article 34 TFEU prohibition on measures having an equivalent effect to quantitative restrictions on imports, and resulted in artificial partitioning of the markets. The prosecutor agreed -- but said that this restriction was justifiable by reference to Article 36 TFEU and the imperative need to protect industrial and commercial property. The Bundesgerichtshof, which this blogger suspects knew the answer to this question all along, considered it necessary to refer the following question for a preliminary ruling.

‘Are Articles 34 and 36 TFEU governing the free movement of goods to be interpreted as precluding the criminal offence of aiding and abetting the prohibited distribution of copyright protected works  resulting from the application of national criminal law where, on a cross border sale of a work that is copyright protected in Germany 

– that work is taken to Germany from a Member State of the European Union and de facto power of disposal thereof is transferred in Germany, 

– but the transfer of ownership took place in the other Member State in which copyright protection for the work did not exist or was unenforceable?’

The Advocate General has advised the CJEU to rule as follows:

"Articles 34 and 36 TFEU governing the free movement of goods do not preclude the criminal offence of aiding and abetting the prohibited distribution of copies of copyright protected works resulting from the application of national criminal law where copies of copyright protected works are distributed by sale in a Member State by making them available to the public in that Member State through a cross border distance selling arrangement originating in another Member State of the European Union in which copyright protection for the work did not exist or was unenforceable".

Unless the CFEU has a brainstorm and decides to uproot its well-established doctrine in Case 341/87 EMI Electrola [1989] ECR 79, this looks like a win for the prosecution.