Exit Festival and Foreign Producers of Phonograms: New Challenge for O.F.P.S.

Bogdan Ivanišević, Head of IP Practice Group at BDK Advokati in Serbia brings us news of a recent challenge to the recoded music collection society in Serbia, by one of Serbia’s biggest live events, the Exit Festival. 

Bogdan explains that back in May 2012, The Serbian Commercial Appellate Court denied a request by the Organization of Phonogram Producers of Serbia (O.F.P.S.) to collect royalties for communication to the public of Italian sound recordings in a Belgrade restaurant. A few months later, the same court issued a decision in an ongoing case that might again be the cause of a headache to the collecting society and this time much larger financial stakes are involved because the party opposing O.F.P.S. is the well known “Exit” Festival in Serbia. 

Exit Festival, 2008

The annual Exit music festival in Novi Sad was first staged in 2000 at the picturesque Petrovaradin fortress on the banks of the Danube, and the festival is now well known internationally and attracts tens of thousands of fans from all over Europe.  The list of celebrities who have played live at the “Exit” festival includes Pet Shop Boys, Morrissey, Billy Idol, The Cult, Guns N' Roses, Franz Ferdinand, Stereo MC's, Iggy Pop, Massive Attack, Beastie Boys, Snoop Dogg, The Prodigy, Moby, Patti Smith, Chemical Brothers, and numerous others. The setting at the amazing Petrovaradin fortress only adds to the appeal. Little wonder then that huge crowds gather every summer to enjoy the music, the sights, and the company of fans with whom they feel culturally close.

O.F.P.S. claimed that the organisers of Exit owed almost 350,000 Euros in unpaid royalties from the use of Serbian and foreign sound recordings during the two festivals held in 2007 and 2008. 

In March 2001, the Commercial Court in Novi Sad granted one half of the requested sum to O.F.P.S. but on 20 September 2012 the Commercial Appellate Court annulled the verdict and ordered a retrial. Similar to the previous case (see http://www.bdklegal.com/code/navigate.php?Id=283&bid=90) where the Commercial Appellate Court ruled that O.F.P.S. had no valid claim to royalties for communication to the public of Italian sound recordings in a Belgrade restaurant. O.F.P.S. did not provide any evidence that it had entered into an agreement with a corresponding collecting society in Italy, by virtue of which it could collect royalties. 

The Commercial Appellate Court again demanded that O.F.P.S. should prove it had standing to sue – or otherwise they would lose the case. 

O.F.P.S. sought to collect royalties from “Exit” for the use of recorded music before concerts, during breaks, and after concerts, as well as royalties for the use of recorded music played (communicated to the public) at the various stages independent of any concerts. For O.F.P.S. to lawfully act on behalf of the foreign producers of phonograms and collect royalties for them, it has to prove that in the relevant period (2007 and 2008) it had concluded appropriate agreements with the relevant foreign collecting societies. 

The court of Novi Sad inferred the existence of such agreements from the grant on 12 April 2005 of a general authorization for O.F.P.S. to operate. The Serbian Intellectual Property Bureau (IP Bureau), which issued the authorization, referred, in the April 2005 decision, to a report submitted by the O.F.P.S. as part of the application, listing bilateral agreements which the organization had concluded up to that date. As the court in Novi Sad read it, with the decision in April 2005 the IP Bureau renewed the authorization to O.F.P.S. first granted in 2002. 

The Commercial Appellate Court differently interpreted the general authorization granted by the IP Bureau in April 2005. The appellate body concluded that in 2005 O.F.P.S. applied for issuance – afresh – of a general authorization, rather than for a renewal of the earlier authorization. Here, the wording of the Commercial Appellate Court’s decision becomes fuzzy (as, unfortunately, it often is in decisions issued by courts in Serbia), but a plausible reading of what the court says is that any prior agreements between O.F.P.S.and foreign collecting societies cannot be deemed to have carried into the new authorization granted by the IP Bureau. In the court’s words: 

"The fact that after the first authorization from 2002, another authorization was issued does not mean that what occurred was a renewal in relation to which the fulfilment of the condition concerning agreements with foreign organizations is to be assessed. Therefore, with respect to the period of validity of the first authorization the plaintiff has to prove that it has standing to sue for compensation for the use of phonograms the rights of which are held by foreign persons, because the statutory presumption [that an organization for the collective management of copyright or related rights is authorized to act on behalf of the rights’ holders] does not apply vis-à-vis foreign rights’ holders. " 

What is not in doubt is that the Commercial Appellate Court does not consider it proved that O.F.P.S. was authorized in 2007 and 2008 to collect royalties on behalf of foreign producers of phonograms. The renewal of O.F.P.S’ general authorization to operate, from April 2005, is not proof. In a closing paragraph, the court instructed the Commercial Court in Novi Sad to establish in the retrial which phonograms were used at the “Exit” festivals in 2007 and 2008, whether those were domestic or foreign phonograms, and whether the plaintiff was authorized to claim legal protection on behalf of the foreign rights’ holders. 

It remains to be seen if O.F.P.S. will be able to provide the requested agreements with the relevant foreign collecting societies as evidence. If that proves impossible, O.F.P.S.will be left only with the statutory presumption of the authorization to act on behalf of producers of phonograms. Here, O.F.P.S. may run into another difficulty. The first-instance court said in the quashed judgment that “drawing an expert report on the share of the use of phonograms in comparison to the rest of the festival program would be almost impossible, i.e. unreasonably burdensome, having in mind that the festivals in 2007 and 2008 lasted four days each, with tens of thousands of different songs performed at different stages”. The task of establishing which portion of the phonograms communicated to the public in 2007 and 2008 was produced domestically would be, if anything, even more daunting. 

Bogdan  Ivanišević JD LLM 

The copyright in this blog remains with BDK Advokati (c) 2012

http://www.bdklegal.com/code/navigate.php?Id=2

OFPS http://ofps.org.rs/

On a personal note I should make it clear that I advise Yourope, the European festivals association, and the Exit Festival is a member of Yourope. Although I am in no way involved in this matter, I have even been to the festival in 2007 - and what a great event!