In the ongoing case between Karen Murphy (publican) and Media Protection Services (pursuing BSkyB's interest), the English High Court has asked the European Court of Justice to rule on whether publicans (and indeed individuals) can import cheaper pay-TV decoders from other European countries.
Ms Murphy had purchased a satellite decoder card for pubs from the Greek company NOVA in order to screen live FA Premier League (FAPL) matches in her Portsmouth pub. The NOVA service was available at a significantly lower price in Greece compared to that charged by BSkyB in the UK. This case is likely to have wider implications as similar occurrences have been observed in other parts of Europe.
Companies such as BSkyB and NOVA are licensed to provide pay-TV packages only for particular territories (e.g. UK or Greece) but the satellite 'footprint' of the broadcasts extends far beyond the territory of the companies' licences. In relation to the FAPL, BSkyB is the broadcast originator, providing filming of and commentary on the live matches, as well as re-selling the rights on to the licensees for other territories (e.g. NOVA).
The case was brought by Media Protection Services Limited not against NOVA, the seller of the decoder, but against the user, i.e. the publican who was convicted of two offences under s.297 (1) of the Copyright, Design and Patents Act 1988 (CDPA). The offences relate to the screening of two FAPL matches on separate occasions, in respect of which the magistrates court held that Ms Murphy "dishonestly received a programme including a broadcasting service provided from a place in the United Kingdom with intent to avoid payment of any charge applicable to the reception of the programme."
The case was appealed to the English High Court of Justice, which asked the European Court of Justice to rule on the question of whether European law "trumps" the provisions of the CDPA.
What are the issues?
Apart from some technical arguments on the wording of a European Directive there are three distinct arguments on which the ECJ has been asked to rule. If any one of them is affirmed it would open the possibility of unrestricted importation of decoders and cards from other (cheaper) member states very much in the same way as pharmaceuticals or cars can be imported from low price to higher price countries.
The three arguments are as follows:
- The European free movement rules 'trump' the provisions of the CDPA. Essentially, the argument is that prosecution under the CDPA has the effect of (i) restricting the importation of cross-border goods (i.e. the decoder cards) between EU member states; and (ii) restricting the movement of audiovisual services within the EU and this would breach Articles 28 to 30 and 49 of the EC Treaty.
- The territorial restriction in the underlying licence breaches European competition law. Ms Murphy argues that the territorial protection and export restriction on the decoder cards as protected by BSkyB's licence amounts to a restrictive agreement breaching Article 81 of the EC Treaty. It does so by artificially partitioning markets by protecting national licensees and preventing or restricting parallel imports.
- The application of the CDPA is discriminatory and hence breaches EU law. This is because it allows criminal prosecution in order to protect domestic UK broadcasting services but offers no equivalent protection to broadcasting services originating from other member states.
This case highlights the tension that exists between IP law on the one hand and competition/free movement rules on the other. IP rights are inherently restrictive, but there may be good economic reasons for such protection as it fosters innovation and may maximise overall welfare by allowing for differential exploitation of such rights.
The arguments are not new. There have been numerous cases, particularly in relation to pharmaceuticals and luxury goods. On the whole, the ECJ has favoured free movement over IP rights. The context of provision of services and licensing of such services is different but not that different. If the ECJ comes down in favour of free movement the likely effect will be a wholesale change of the way that pay-TV sports are marketed across Europe.