CMOs public performance tariffs: Spanish court indirectly urges for the application of an “European average” criterion but then uses the UK one. Is there any room for discretion besides the CRM Directive?

In this guest post David Serras Pereira (SCM) discusses a recent decision which is interesting to anyone working in the collective rights management sector.

Here's what David writes:

CMOs public performance tariffs: Spanish court indirectly urges for the application of an “European average” criterion but then uses the UK one. Is there any room for discretion besides the CRM Directive?

Another interesting Spanish decision (here – search using reference 2000/2019 of Catalunya - Barcelona Court) concerning copyright collective management organizations (CMOs)’ tariffs was issued on November 7th last in the context of proceedings between a music promoter and Spanish CMO SGAE. 

The Audiencia Provincial de Barcelona considered that the criterion applied in relation to the public performance tariffs used by SGAE was too ‘heavy’ for a heavy metal show, and thus reversed the decision at first instance. 

Usually, CMOs have their own “Book of Tariffs”, which are applicable to different types of events and venues. At the time when the proceedings began, SGAE applied a 10% licence fee on the box office income (it is now 8,5%). The 10% fee was considered abusive by the court while, curiously, pointing to another CMO’s (UK PRS for Music) criteria as a fair and good percentage to apply, ie 3% on the box office income. 

The case began in 2013, when promoter of Def Leppard y Whitesnake, by the name of Rocknrock, refused to pay the 10% licence fee requested by SGAE, claiming that SGAE did not represent all rightsholders and that it had abused its dominant position. 

Regarding the latter aspect, the Spanish Competition Authority in separate proceedings sanctioned SGAE with a EUR 3 million fine following this and other matters (here). This eventually led SGAE to reduce the fee from 10% to 8,5%. 

In its ruling, the Barcelona court considered that SGAE had a monopoly and that 8,5% was still too high a percentage. The court pointed, among other things, to the fact that the percentage asked by SGAE was above the European average and, unexpectedly, indicated the UK case as the role model: 3% of box-office revenue, which is perhaps the lowest or one of the lowest in all EU. 

The decision can still be appealed to the Supreme Court and a final ruling will have to be made, but the decision raises a number of interesting points. 

The tariffs of a CMO (as a body representing several rightholders) normally reflect the criteria that the individual rightholders considered to be fair for licensing use of their works (either decided during a general assembly or by other means). 

It is possible for a court to make an intervention in the exclusive rights’ nature setting a maximum threshold not decided by the rightholders themselves? The basis for any such intervention should be framed in the context of the CRM Directive (here; Recitals 31 and 35 and Articles 16(2) and 35), which followed the Commission Recommendation 2005/737/EC (here). Even prior to the adoption of the directive, in OSA the Court of Justice of the European Union highlighted how tariff setting might also fall within the scrutiny of competition authorities. 

From the Directive it follows that, while tariff setting is in principle a matter of autonomy, there are some limits to it, ie:

• Tariffs should be determined on the basis of objective and non-discriminatory criteria 
• Tariffs should be reasonable in relation to, inter alia, the economic value of the use of the rights in a particular context and the nature and scope of the use of the work 
• Tariffs should offer appropriate remuneration to rightsholders for the use of their rights 
• Tariffs should be made public by the CMO 

This decision raises the following issues: 

a) Can rightholders right to set up how much they want to charge for the licensing of their creations be limited beyond the limitations set up by the CRM Directive and national legislation? 

b) If so, can such limitation be based on an European average of licencing practices of all the CMOs? 

c) Can it be considered abusive any tariff that is not close to the 3% one used by PRS? 

If SGAE decides to appeal, we will have to wait for the Supreme Court decision. 

The COPYKAT celebrates World IP Day

Following the celebrations of World Book and Copyright Day and World IP Day we are bringing you the latest news from the copyright world.

Monkeys Lack Standing to Sue for Copyright Infringement – 9^th Circuit Rules on ‘Monkey Selfie’ Case

On April 23rd the long dispute over the infamous ‘monkey selfie’ (covered here, here and here), which was taken by a Macaque monkey, named Naruto, has finally been decided. Following PETA’s complaint in 2015 where the organisation had requested to have any profits that will be gained from the photo taken by Naruto should go to the monkey and preserve its habitat, last year in July the Ninth Court has heard the parties’ arguments. Subsequently, two months later the parties have reached the settlement and filed a motion to dismiss the case but the motion was denied by the court.

The Ninth Circuit Court of Appeals held that the monkey, which was named as the plaintiff, lacked statutory standing to bring an action for copyright action under the Copyright Act. Neither it was possible for PETA to validly assert ‘next friend’ status that would allow it to represent the monkey “both (1) because PETA has failed to allege any facts to establish the required significant relationship between a next friend and a real party in interest and (2) because an animal cannot be represented, under our laws, by a ‘next friend’”.

Bulgaria brings amendments to its Copyrights and Neighbouring Rights Act

Bulgaria was one of the four countries which have failed to pass the laws that will fully implement EU Collective Rights Management Directive (Directive 2014/26/EC). On 7^th December 2017 the European Commission said it will refer Bulgaria to the Court of Justice of the EU and request a fine of €19,121.60 per day for failure to transpose the Directive which the country was supposed to enact by April 2016. The main aim of the Directive is to improve the operation of collective management organisations and set common standards for the multi-territorial licensing of rights for musical works that are distributed online.

In light of the Directive, Bulgaria has recently passed several amendments to is Copyrights and Neighbouring Rights Act. The new provisions will now allow non-profit organisations and other commercial legal entities (independent companies) to conduct the collective management of copyrights. In order to do so, independent companies will have to enter into a separate agreement for copyright management with the rightholders and register in the Rights Management Organisations Register at the Ministry of Culture. Furthermore, amendments introduced to the Copyrights Act regulate the responsibilities of the parties in the event of live performances, shift the control of copyright compliance to municipalities and provide the Minister of Culture with a power to oversee the collective management of rights.

SET TV Service Provider sued by Amazon, Netflix and Several Major Hollywood Studios

Several major Hollywood studios, including Disney, Paramount Pictures and Warner Bros, together with Netflix and Amazon, have formed a new (another?!) anti-piracy partnership, Alliance for Creativity and Entertainment (ACE), and have brought an action against Set Broadcast LLC, seller of the popular IPTV service SET TV. Following their actions against Tickbox and Dragonbox devices, members of ACE have filed a complaint against Set Broadcast accusing it of facilitating mass copyright infringement. In the view of the Plaintiffs, the software offered by Set Broadcast allows its buyers to stream copyright infringing content. As stated in the complaint, “Defendants market and sell subscriptions to “Setvnow,” a software application that Defendants urge their customers to use as a tool for the mass infringement of Plaintiffs’” copyrighted works. Additionally, Defendant invites its customers to download and install the software on their portable devices and computers. Apart from the software the company also offers preloaded boxes which enable their users to watch ‘on demand’ content and live streams of TV Channels. Plaintiffs claim that “[f[or its on-demand options, Setvnow relies on third-party sources that illicitly reproduce copyrighted works and then provide streams of popular content”. Therefore, ACE members are claiming in their action statutory damages and seeking an injunction to close the service and seize all the devices that are in Defendant’s possession. ACE spokesperson said that piracy software such as ‘Setvnow’ impair films and TV shows market, and cause harm “to a vibrant creative economy that supports millions of workers around the world”. Therefore, ACE is committed to “protecting creators and reducing online piracy through dedicated actions against illegal enterprises”.

Seinfeld Takes Action to Dismiss Copyright Complaint Over “Comedians in Cars Getting Coffee” Series

Earlier this year in February, director Christian Charles has filed a complaint in the Southern District of New York alleging comedian Jerry Seinfeld, together with companies involved in the production of the Comedians in Cars Getting Coffee web series. Charles claims that he has come up with the concept of the series and although he created the pilot episode, he is now out of the production, and royalties, as well as profits in violation of his copyright. In response to the lawsuit, (as reported by IPWatchdog), on April 4^th Seinfeld filed a memorandum to support the motion to dismiss the case. He asserts that the copyright claim should be dismissed for being time-barred given the claims were filed after the expiration of the statute of limitations. In the situation, where the Court finds the claims cannot be dismissed on the time limit basis, Plaintiff’s claims should be dismissed on the basis that they fail to provide a protectable copyright interest. In the view of Seinfeld and others, the concept of comedians in cars that has been followed by similar concepts such as Carpool Karaoke and Cougars in Cars Getting Cosmos, which “consists of nothing but ‘common stock ideas’ and unoriginal scènes à faire that do not rise to the level of original protectable expression”. Additionally, the Defendants claim that Charles has fraudulently obtained his copyright by registering similar title “designed to mislead the Copyright Office into accepting a copyright application that directly conflicted with the one filed by Mr. Seinfeld.”

Can A Tattoo be Protected by Copyright? – Continued

In the previous CopyKat [look here] we have looked at the dispute between Solid Oak Sketches and Take-Two over copyright infringement of tattoo designs. During the last week, a new lawsuit has been filed which addresses the issue of tattoo’s copyright protection. In her action against WWE and 2K Gamers, tattooist, Catherine Alexander who inked WWE wrestler Randy Orton argues that her designs were used in a commercial manner without her consent. Similarly to the NBA2K game, here video games from WWK2K series prominently feature Orton’s multiple tattoos in digital designs. According to Alexander, the games display Orton’s tattoos in a manner that is same or substantially similar to her copyrighted works. The question that the Court will have to answer, as indicated by Forbes, will be whether WWE and 2K Games have actually copied the work and whether there is a similarity between Alexander’s protectable designs and works in the video games. In the view of Alexander, “there is no doubt that her designs have been ripped off and reproduced in an effort to make them seem as close to real-life as possible”. 


In 2017 China’s Internet Copyright Industry Grew by Over 27%

In a recently released report, The National Copyright Administration of China reveals that its internet copyright industry grew by over 27% last year and has reached over  636 billion yuan, (US$100 billion). The biggest contributors are online news portals and online games which account for 73% of the total market value. In 2017 online news and information market grew by 40%, whereas online gaming increased by 32% and reached 235.5 billion yuan. Live streaming and short videos over the past two years have seen the most rapid growth, achieving a number of 422 million live streaming users. Mr Zhang Qinkun, Secretary-General of the Internet Copyright Industry Research Center, in observing prospects in the industry for the coming years said that businesses should concentrate on improving the quality of their content in order to attract users.

At the same time, the National Office for the Fight Against Pornography and Illegal Publications revealed in its report that China has dealt with over 460 cases in the first three months of the year that involved copyright infringement. According to the National Office, in connection with the cases more than 1.5 million illegal publications, such as e-books, videos and games were confiscated.

Swedish Patent and Registration Office (PRV) Wants to Promote Legal Streaming

The Swedish Patent and Registration Office (PRV) has created national aggregator called Streamalagligt.se (‘stream legally’), which aims to promote legal streaming among Swedish citizens. The platforms allow for searching of copyrighted works, such as films, TV shows, music, and sports events providing a single access point to find legal digital content. Streamalagligt.se is part of agorateka, portal of the European Intellectual Property Office (EUIPO) that intends to raise awareness and allow the search for legal content through national-level portals. Through the creation of its portal, Sweden joins 14 other EU countries that already have aggregator websites as part of agorateka programme.

For more information click here and here, and watch the video here.

This update by Mateusz Rachubka

Can we always trust copyright licensing?

The 1709's knowledgeable readership will be well aware that royalties are the lifeblood of the copyright 'promise'. In exchange for cultural enrichment, society grants authors, artists and musicians a legally enforceable set of rights which constrain how the works they create may be exploited. Very few of these creators receive just a single lump sum in exchange for releasing these rights, and indeed the whole idea of the lifetime plus 70 years duration of these rights in predicated upon a steady stream of royalties making up the lion's share of a successful author or artist's income. Behind this relatively simple concept lies a truly labyrinthine web of organisations which are responsible for assessing, collecting, apportioning and generally administering these various fees, royalties and other disbursements. Of course many copyright holders are large or SME companies, who generally have gained their rights through section 11(2) CDPA which covers works made by individuals in the course of their employment. For various reasons, including the fact that these companies are, or should be, resourced to administer their rights in a businesslike manner, this article does not consider this group of rightholders further.

Be it tiny fractions of a penny for each Spotify download, or seemingly generous advance fees running to many thousands of pounds paid to best-selling authors, the money comes almost by magic, from a veritable alphabet soup of abbreviations, acronyms and occasionally organisations with real names. Among these are the CMOs or Collective Management Organisations, often referred to as Copyright Collecting Societies. Each creative discipline has its own CMO, or for instance like the music industry, several. These are generally not-for-profit limited companies. Added to these are many other intermediary bodies, such as publishers (literary and music), agents, management, record companies, and even government sponsored bodies such as the Public Lending Right Office (PLR is not technically a copyright issue, but it works in a very similar manner to a CMO) and of course the IPO itself falls under this heading because it collects fees in respect of orphan works. And if the UK ever embraces a private copying levy, that strand will also need to be added to the existing skein - although skein perhaps implies an order which is wholly absent from the vast range of intermediaries who service the copyright 'industry'. Organisations and companies in this second, non-CMO, group which are manifestly run for profit are termed independent management entities (IMEs) in the jargon, and this distinction becomes significant when we look later at some of the legislative initiatives in this area.

The whole system runs on trust. There are few true audits, and most importantly, the author or artist who lies at the far end of this chain of beneficence has virtually no means of verifying that the amounts he or she receives are the correct ones. Even in the world of highly detailed contracts such as in the music business, what the artist receives in royalties is virtually impossible to confirm independently, given the complexity of the supply chains, including the reciprocal links between various CMOs worldwide. This is one of the reasons for bodies which represent the interests of their particular creative groupings, such the Musicians Union, the Society of Authors, the Featured Artists Coalition, the Association of Photographers and many others. Like the more traditional labour unions, these bodies advocate on behalf of their members and attempt to get improvements in their income. But even they have to assume a certain amount of trust that the system is working both efficiently and honestly. And at a time when so many other institutions have proved unworthy of the trust placed in them, be it banks or sport governing bodies, pharmaceutical giants, motor manufacturers or high street supermarkets, it would be wise to be a little sceptical about all this when it comes to copyright revenues. Whether it's cockup or conspiracy, the opportunities for the money which rightly belongs to the creators to go astray are enormous. As are the sums involved. The International Confederation of Societies of Authors and Composers (CISAC) reported that for 2014, the total revenue collected by its members worldwide was €7.9 billion (£5.8 Billion), while the figure for the UK alone was €635M (£470M).

These figures underline the need for financial probity, especially where the recipients of these sums (after administrative expenses have been deducted) are by definition self-employed individuals (albeit possibly registered companies for tax efficiency purposes) who have neither the time nor the expertise to hold their paymasters to account. This is the fundamental reason for the EU Directive 2014/26 EU on collective rights management, which required member states, inter alia, to supervise the running of CMOs and introduce a code of practice to apply best practice and provide greater transparency for rightholders. The UK Statutory Instrument (SI 2014/898) which transposes the Directive into UK law is not yet fully in force. However the SI lays out the criteria for the CMOs to incorporate into their codes of practice, which if they are judged to be inadequate, can result in a more suitable code being imposed on the society concerned. And there are financial penalties for CMOs which fail to abide by their own or an imposed code.

So with all that in mind, what are we to make of a serious breakdown in the system which goes to the very heart of the trust which it relies on? This autumn a body which represents some photographers, EPUK, discovered that someone at the previously well-respected picture agency, Rex Features, had been forging the signatures of photographers on mandate forms in order to claim a share in the payouts from the Payback scheme run by the CMO Design and Artists Copyright Society (DACS). EPUK estimate that the Payback scheme would have paid around £400,000 to Rex during 2014, although how much of this was based on the fraudulent mandates is not known at this stage. Readers are invited to read both the EPUK press release, and the DACS release, in order to get more details on the matter. What is clear is that if the system can break down in this way once, what are the chances that something similar is going on elsewhere, as yet undetected? As far as is known, the fake mandates related to real people, who in fact got payments they weren't expecting (albeit after Rex appears to have taken out an unjustified administration fee), however exactly the same process could have been used to divert funds to bogus individuals. So how will the EU Directive and the UK implementation of it, prevent this kind of behaviour in the future? It remains to be seen, but what is significant about this allegation is that Rex is not a CMO, but an IME as explained in paragraph 2 above. Thus vast chunks of the EU Directive do not apply to them as an IME and under the SI as it stands, while IMEs appear to be included under the heading of 'relevant licensing body', the criteria for the codes of practice fail to include anything on the integrity of the staff, or on safeguards against outright fraud (I don't think "act in the best interests of its members" really covers it with sufficient vigour). This incident therefore should act as a wake up call that more is still required to bolster trust.

The good intentions of the EU Directive and the IPO's secondary legislation are laudable but until we can have genuine trust in the vast machinery which monetises copyright, all talk about reforming other parts of copyright is rather like building a house on sand.

Implementing the Collective Rights Management Directive: tell the UK government how!

The February 2015 issue of the UK Intellectual Property Office's IP Connect e-zine carries the following notice:

Consultation: Collective Rights Management (CRM) Directive 

The Government has launched a consultation on proposals for the implementation of the Collective Rights Management (CRM) Directive [click here for the Directive's context-setting webpage and here for the actual text].

This Directive aims to modernise and improve the functioning of Collective Management Organisations (CMOs) across the EU. It introduces minimum standards for European CMOs that are intended to enhance governance and transparency and put right holders at the centre of a decision-making. Additionally, it introduces criteria that CMOs wishing to engage in multi-territorial licensing of online music must comply with.

Implementation of this Directive into UK law must happen by April 2016. The Government will be consulting on two options, as well as the discretionary provisions in the Directive and the costs of implementation.

The CRM Directive is a move towards the completion of the digital single market. Its adoption fulfils several of the UK’s policy objectives for collective rights management specifically and copyright more generally. In particular, as one of only two net exporters of music in the EU, the UK stands to gain from the better transparency and governance of CMOs across the EU.

The IPO has already held workshops for all the main stakeholders affected by the Directive: CMOs, independent management entities (IMEs), rightholders and licensees. We are also talking to stakeholders about the need for further events during and after the consultation period.

The Government intends to publish a summary of the responses to the consultation and its response to those responses following the General Election in May 2015.

In the light of those responses it may need to amend the Impact Assessment and will then undertake a technical consultation on the draft Regulations which are required to implement the Directive. The implementing Regulations will be laid in time to ensure that the Directive’s provisions enter into force in the United Kingdom no later than 10 April 2016.

The deadline for comments is midday 30 March 2015. The consultation document and response form are both available on the .gov.uk website [Indeed they are. But if responses are sincerely wanted, why not give a link to the page that deals with the consultation, the 44-page consultation document and the email address to which comments can be sent, copyrightconsultation@ipo.gov.uk, rather than leaving it to the IP blogging community to do so?].

Having read the CRM Directive when it was first published, this blogger formed the opinion that it was very much aimed at a number of collective rights management organisations and countries in the Mediterranean sun-belt and that UK CMOs would have little trouble meeting the standards for transparency and answerability to their members. However, there are still some nuts and bolts to tighten before the mechanism for the supervision of CMO management is in perfect working order. It's good to be consulted, so do make the most of the opportunity.

The Collective Rights Management Directive is now Directive 2014/26/EU

As announced earlier today on the IPKat, the new EU directive "on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market" [here and here] was published today in the Official Journal of the European Union as Directive 2014/26/EU of the European Parliament and of the Council of 26 February 2014 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market.

The directive - whose full text can be accessed here - will enter into force on the 20th day following its publication, and Member States will have time until 10 April 2016 to transpose it into their national laws. 

OSA ruling: no Czech exemption from health-spa music royalty payments

Today was the day that the Court of Justice of the European Union (CJEU) gave judgment in Case C‑351/12, OSA – Ochranný svaz autorský pro práva k dílům hudebním o.s. v Léčebné lázně Mariánské Lázně a.s., a reference for a preliminary issue from a Czech court, the Krajský soud v Plzni. This case has already been eloquently and elegantly explained by Eleonora on the IPKat weblog, here, so I shall content myself with reproducing the Cura press release and adding the occasional comment. According to the press release:

A spa which transmits protected musical works to its guests by means of devices located in their bedrooms must pay copyright fees

The territorial monopoly granted to copyright collecting societies is not contrary to the freedom to provide services

OSA, a copyright collecting society, holds the exclusive right in the Czech Republic to collect fees, on behalf of authors, for the use of their musical works. The company Léčebné lázně Mariánské Lázně, which manages a spa, installed radio and television sets in the bedrooms of that establishment in order to make works managed by OSA available to its guests. However, Léčebné lázně Mariánské Lázně did not enter into a licence agreement with OSA and refused to pay fees to it on the ground that, under the Czech legislation, health establishments may freely transmit protected works. OSA, being of the view that the national legislation is contrary to the EU Copyright Directive, brought an action before the Czech courts claiming that Léčebné lázně Mariánské Lázně should be ordered to pay fees for having made protected works available to its guests.

The Krajský soud v Plzni (Plzeň Regional Court, Czech Republic) asked the Court of Justice whether the Czech legislation under which health establishments are exempt from the payment of copyright fees is in accordance with the directive, inasmuch as that directive does not provide for an exemption of that kind. The Czech court also wishes to know whether OSA’s monopoly over the collection of fees in the Czech Republic is compatible with the freedom to provide services and with competition law.

By its judgment delivered today, the Court points out, first, that by transmitting protected works by means of television and radio sets located in the bedrooms of its guests, a spa carries out a communication to the public of those works. Such a communication must be authorised by the authors, who must, in principle, receive adequate compensation.

In that respect, the Court notes that the directive does not exempt a spa from the payment of fees where it transmits protected works to its guests. Consequently, the exemption laid down by the Czech legislation does not comply with the directive [It's difficult to see how the CJEU could have credibly reached any other conclusion on this point].

Secondly, the Court notes that the territorial monopoly granted to OSA constitutes a restriction on the freedom to provide services inasmuch as it does not allow users of protected works to choose the services of a collecting society established in another Member State. The Court emphasises however that the restriction in question is justified, since that system is appropriate and necessary for attaining the objective of the effective management of intellectual property rights. As EU law stands at present, there is no other method allowing the same level of copyright protection [despite dreams that have been entertained from time to time of a "perfect world" in which competing collecting societies continue to undercut each other until the copyright owners are assured of the closest sum to zero that the market will allow them ...]. The Court therefore concludes that the monopoly granted by the Czech legislation to OSA is compatible with the freedom to provide services.

The Court notes, however, that the imposition by a national copyright collecting society of fees which are appreciably higher than those charged in other Member States or the imposition of prices which are excessive in relation to the economic value of the service provided is indicative of an abuse of a dominant position [this is an interesting topic: "appreciably higher" can be measured in percentage terms or absolute terms, obtaining quite different results -- and "excessive in relation to the economic value of the service provided" is a phrase that screams "litigate me!"]. Nevertheless, it is for the Czech court to examine whether such a situation exists in the present case.