In a dispute between film studios Warner and Universal against the German offering zattoo.de of online TV service Zattoo, the Regional Court Hamburg decided on 8 April 2009 (ref. no. 308 O 660/08) that zattoo.de must not retransmit TV content without the consent of the original right holders. The court granted preliminary injunctions against zattoo.de in relation to five of the studios’ movies. The court held that the consents given by the German public broadcasters and the German collecting societies to the retransmission by Zattoo were irrelevant because they did not have the right to grant online retransmission rights. Zattoo announced that it will carry on negotiations with the collecting societies in the hope that the collecting societies will be able to enter into a deal with the studios. Depending on the outcome of these negotiations, Zattoo has reserved the right to initiate main proceedings in which the preliminary injunction may be overruled.
The defendant is a Swiss company offering an advertisement-financed service branded “Zattoo”, which allows users in several European countries to receive television channels on their personal computers free of charge. In Germany, Zattoo retransmits content via the internet which has been broadcast by the German public broadcasters ARD and ZDF. ARD and ZDF, as well as the German collecting societies (with one exception), have consented to the retransmission. Zattoo does not retransmit content of the German private broadcasters, which have objected to such retransmission. In contrast with some other jurisdictions where retransmission without the broadcaster’s consent is seen as possible (such as Switzerland and Spain), Zattoo does not retransmit without the broadcaster’s consent.
Technically, Zattoo receives satellite TV content, converts and encrypts the content and retransmits it simultaneously via the internet to its subscribers. The subscribers have to register and install the free software “Zattoo-Player” on their PC to receive the services. The transmission of the national television channels is limited to the respective national territories via the so called “geotargeting” of the IP-address by Zattoo.
Zattoo argued that their service constitutes a cable retransmission under section 20b of the German Copyright Act (“Urheberrechtsgesetz” – “GCA”) and therefore Zattoo only requires the consent of the broadcasters, because of the broadcasters’ ancillary copyrights under section 87 para. 1 GCA, and of the collecting societies, because the copyrights of the right holders can only be claimed by collecting societies in the case of cable retransmission according to section 20b GCA. The background of this provision, which implemented Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission (“Cable and Satellite Directive”), was that a simple cable retransmission should not be subject to the complex process of acquiring rights from various right holders. Only the broadcasters’ rights should have to be obtained individually because it was assumed that there are not many broadcasters.
The court disagreed with Zattoo’s view. It stated that the statutory right to retransmit broadcasts only applies to cable retransmission, and not to retransmission via the internet. Accordingly, it argued that the German public broadcasters ARD and ZDF and the German collecting societies (GEMA and others) were not entitled to grant online retransmission rights to Zattoo. Only the right holders of the content, i.e. in the case at hand Warner and Universal, were able to grant such rights. This explanation followed on from a systematic and historic interpretation of section 20 b GCA and the Cable and Satellite Directive.
The wording of section 20 b GCA leaves open the question as to whether or not the network used by Zattoo constitutes a cable-system within the scope of section 20 b GCA. The provision itself does not provide a technical definition, nor does any of the legislative guidance. In view of the fact that the network infrastructure used by Zattoo consists of interconnected cables and technically resembles the circulation via conventional coaxial cable, section 20 b GCA could be understood to include the internet.
However, the court held that such an interpretation disregarded the historical context of section 20 b GCA and its position in the exploitation rights regime. Section 20 b was inserted into the GCA as part of the implementation of the Cable and Satellite Directive. The technological basis for making content available to the public by using the internet was not sufficiently known at the time the legislation was passed. A further indication that a technology-neutral interpretation should not be applied to section 20 b GCA is contained in Article 11bis para 1(ii) of the Berne Convention and its “Annotated Principles”. Article 11bis para 1(ii) merely specifies the rights of the originator, but does not specify the mode in which these rights can be exercised, that is to say whether these rights are exercised by collecting societies or by the rights holders themselves.
It was not possible to conclude unequivocally from the wording of section 20 b GCA, and from an examination of its legislative history, that this section encompassed retransmission over the internet. Therefore, the court said that a broad interpretation encompassing the types of cable retransmission which were not known at the time when the GCA came into force would not be appropriate. Section 20 b GCA constitutes a restriction of the exclusive rights of the right holders to decide on the exploitation of their works and thus has to be interpreted in a narrow manner.
The court did not ignore the fact that Zattoo had purchased an interest in a bundle of rights from one source (a situation which is comparable to a cable company’s interest). However, the court could not extend the ambit of section 20 b GCA to include internet transmission in the absence of further express legislation particularly because the quality of retransmission of television programmes over the internet is considerably different from the quality of conventional cable retransmission over proprietary coaxial cable networks. With the single act of feeding the signal in the decentralised and open network infrastructure of the internet, a potential diffusion rate is established which surpasses the rate reached by the present and spatially defined coaxial cable networks. In addition, internet connections can be set up more easily and cheaply over existing network infrastructures than coaxial cable connections and therefore the already widespread coverage can be increased further and more quickly. The fact that Zattoo geographically restricts retransmission by the means of “geotargeting” to Germany, and the fact that relatively few users are registered with Zattoo in comparison with the cable networks did not change the court’s view because of the far reaching effect of the internet and the potential effects such a service could have on the right holders.
The court concluded that, since the service does not constitute a cable retransmission in the sense of section 20 b GCA, the collecting societies’ consents were irrelevant and the contract with ARD and ZDF also did not help as ARD und ZDF can only grant rights with respect to their ancillary copyrights as broadcasters under section 87 para. 1 GCA, but not with respect to the copyrights of the authors and right holders.
This judgment, in many respects, continues to treat the traditional means of content transportation (cable and satellite) and the internet differently. In the case at hand, the Regional Court Hamburg cannot necessarily be blamed for this. Although there might have been room for a more progressive application of the law by the court, it is mainly a failure of the German legislature which did not clearly define the application, or non-application, of section 20b GCA with respect to the internet in its latest copyright reform, which became effective as of 1 January 2008.
It can only be hoped that the legislature makes up for this omission and introduces a clear rule with the next copyright reform, for which the consultation has already started. The key question not only in Germany but within Europe will be whether the European and national legislators really want to extend the collective rights regime with respect to pure retransmissions to the internet or rather whether there should be a silent phase-out of the retransmission principles under the Cable and Satellite Directive (there are some indications that in fact the latter may happen). In any case, a clear regime without frictions between different technical means should be established.