Judgment

The German Federal Court of Justice (“Bundesgerichtshof” – “FCJ”) recently ruled on the legitimacy of online video recording services. Three parallel actions (ref. nos. I ZR 215/06; I ZR 216/06; I ZR 175/07) were brought by two major German private TV broadcasters, RTL and SAT1, against www.shift.tv and www.safe.tv, both of which provide online private video recording (PVR) services. On 22 April 2009, the court ruled that, depending on their technical set-up, online PVR services will usually infringe copyright.

In passing judgment on the legality of online PVR services, the FCJ also ruled on four key issues of German copyright law. Therefore this decision is of major importance for many business models and copyright holders and extends beyond the issue of online PVRs and the rights of TV broadcasters under sect. 87 et. Seqq. German Copyright Act (“Urheberrechtsgesetz” – “GCA”).

Facts

The online PVR service providers operate facilities for the receipt of TV signals by satellite reception stations, transformation of these signals and storage of the TV signals (TV content) in customer dedicated space on their servers. Customers select the content to be stored and can download or stream the content as often as desired and from wherever in the world they are accessing the internet. PVR services are financed by both advertisements and monthly charges.

The facts made available to the FCJ from the hearings in the lower courts did not provide a sufficiently clear explanation as to the exact technical set-up of the PVR services. Therefore, in coming to a decision, the FCJ considered all possible ways in which the PVR could have been set-up.

Decision

The four key copyright issues on which the FCJ ruled were as follows.

  1. The court had to consider which person actually performs the act of reproduction of the copyright works under sect. 16 GCA and art. 2 of the Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society (“InfoSoc Directive”) in scenarios where one party controls and maintains the copying and storage infrastructure and another party triggers the copying and storage by remote access to the infrastructure. Whoever is performing the restricted act needs to have the right to do so under a licence from the copyright holder or a statutory exemption in the GCA. The FCJ held that the person performing the reproduction is the person who technically triggers the reproduction, even if this involves the use of technical means provided by a third party. Thus, if an online PVR or other service is structured so that all acts of copying are triggered by the customers, the service provider does not perform any act of reproduction. If copying for private purposes, the customers can rely on the statutory exemption for private copying under sect. 53 GCA so that the service would not infringe the copyright holders’ right of reproduction in any way.
  2. The FCJ held that in the event that a service provider performs an act of copying it cannot rely on sect. 53 para. 1 GCA. The sect. 53 provision allows single copies of a work to be made and allows a person authorised to make such copies to cause such copies to be made by another person, but only insofar as this is done free of charge. The Defence argued that if no profits are made by the service and/or if the customer itself pays no fee it is free of charge. The FCJ found that a payment is received if the service provider aims to profit in the future. It was held to be irrelevant that the fees paid by customers for the actual service will not generate a profit as long as the service provider is looking to create a profit by other means, for example by selling advertising space on the webpage. The consequence of this decision is that the private copying privilege granted by sect. 53 only applies to copies made for private purposes by the customers themselves or by a truly non-profit organisation for its customers.
  3. The FCJ held that online PVR services do not infringe the exclusive right of copyright holders to make copies available to the public as protected by sect. 19a GCA and art. 3 InfoSoc Directive. Offering a single copy intended for one person’s exclusive use does not constitute making copies available to the public, even if identical copies are publicly offered to multiple persons.
  4. However, the FCJ stated that the exclusive right of copyright holders to retransmit the copyright work (sect. 20 GCA and art. 3 InfoSoc Directive) is infringed in the event that the customer performs the retransmission. In this case, the virtual video recorder (the server space allocated to the customer) is part of the sphere of the customer. The right of retransmission is infringed by retransmitting broadcasting signals simultaneously to a sufficient number of customers which constitute the “public” in the meaning of the law. Hence, the fact that the data did not physically leave the defendant’s infrastructure was insignificant.

Consequences

The result of these decisions is that it will be very difficult for an online PVR service not to infringe copyright – the infringement is either triggered by the service provider performing a reproduction, or by the customer retransmitting the copyright work. Only niche services where copying is triggered by the customer and where the transmission of each particular set of TV signals (e.g. a TV show) is transmitted only to a singular person and not to the “public” will avoid infringement.

The judgment extends beyond the immediate question as to the legality of online PVRs and contains decisions on many issues which have not previously been decided under German law. In particular, the statements of the FCJ as to who actually carries out the reproduction is of importance for many business models in the virtual world, for example music and video online services and cloud computing, and also for traditional IT outsourcings.