The Regional Court of Munich has decided that the music industry's common practice of splitting online rights into the mechanical reproduction right and the right to make publicly available and to subsequently claim licence fees for both rights separately, conflicts with German copyright law. The court held that, in order to fulfil the legislative purpose of avoiding multiple claims and ensuring legal certainty of licences, such splitting of one uniform economical-technical process into two separate exploitation rights is not possible.

Decision

The court declared the practice of splitting online rights into the mechanical reproduction right (Section 16 German Copyright Act (GCA)) and the right to make publicly available (Section 19a GCA) and to subsequently claim licence fees for both is inconsistent with German law. The court held that a kind of use "mechanical reproduction right in the online area without the right to make publicly available" cannot exist. However the court did not state whether this is only the case with respect to streaming platforms such as MyVideo, the plaintiff in the case, or also with respect to download platforms such as iTunes.

Facts and background

The claimant was MyVideo Broadband S.R.L, a subsidiary of the major German TV company ProSiebenSat.1 Media AG and a provider of a user-generated video content platform similar to YouTube (http://www.myvideo.de). Every user is able to upload videos after passing through a registration procedure which includes the acceptance of the claimant's General Terms and Conditions that – in extracts – reads: "Every user bears exclusively and without restriction all responsibility for all information provided by him/her." Videos can be watched by the users only via streaming technology, with no downloading.

The defendant was CELAS GmbH, a joint venture of the German music collecting society GEMA and the UK music collecting society MCPS-PRS (now: "PRS for Music"). It claimed to manage the mechanical reproduction rights of the Anglo-American repertoire of EMI Music Publishing. The mechanical reproduction rights comprehend the rights to reproduce and distribute content/recordings in multiple copies.

In early 2008, the parties failed to reach an agreement in negotiations over licence fees in respect of these rights for the years 2007 and 2008. Later that year, MyVideo concluded an agreement with GEMA regarding the website myvideo.de. With respect to the Anglo-American repertoire of EMI Music Publishing claimed by CELAS, the agreement between GEMA and MyVideo expressly excludes the mechanical reproduction rights, but only includes the right to make this repertoire publicly available.

This took place against the background of EMI having moved the mechanical reproduction rights of its Anglo-American repertoire from national collecting societies such as GEMA to CELAS for European-wide licensing. This development was triggered by a highly disputed recommendation of the European Commission on collective rights management aiming for more competition and convenience for music users to obtain the rights for international music offerings such as online platforms. According to the traditional European music licence scheme, users have to enter into licence agreements with the national collecting societies in each relevant country individually. Due to legal restrictions, EMI did not move the right to make publicly available as well. This resulted in a split of rights between CELAS and GEMA, a situation which has only arisen in Germany.

During the negotiations and in their aftermath, CELAS threatened MyVideo with injunctive relief. This caused MyVideo to file an action for a declaratory judgment, seeking a ruling that CELAS has no right to hinder the offering of music on myvideo.de.

Reasoning

It is a general principle under German copyright law, that the rights to exploit a work can be split with an "in rem" effect only insofar as the respective separate exploitations cover independent so-called "economical-technical" exploitations. The court held that this principle is infringed in the case at hand. It based its conclusion mainly on two reasons.

First, a splitting of the rights in the online sector is regarded as technically impossible. The making publicly available right under Sect. 19a GCA implies a technically necessary reproduction due to the fact that in the overwhelming majority of cases the user and the content made publicly available are located in different places. In the court's view, even GEMA recognises this by offering a "package" of the mechanical reproduction rights and the rights to make publicly available (as agent of GEMA).

Second, the court held that the practice of CELAS (and GEMA) bears the abstract danger of unjustified multiple claims. Connected with this is a possible infringement of the principle of legal certainty, deriving from the splitting of the unitary technical process. The court said that this uncertainty is not legitimately caused by the existence of economically dividable exploitation means, but merely results from the artificial splitting up of the right. A realisation of the online rights of the Anglo-American artists would have been equally possible if the mechanical reproduction rights had been transferred together with the rights to make publicly available.

Impact

The judgment has commanded a great deal of attention in the online content and music communities as it seems to contradict international standard practices in the music industry and possibly even the recommendation of the EU on collective rights management. The judgment is not binding and has been appealed to the Regional Appeal Court of Munich (and possibly be finally decided by the German Federal Court of Justice or even the ECJ). Thus, the final impact of this judgment remains to be seen. For the time being, the judgment adds another factor of legal uncertainty and complexity to the already far too complex structure of collective rights management schemes in Europe.

Finally, in an "obiter dictum", the Regional Court of Munich raised the question whether CELAS is a collecting society within the meaning of German copyright law. If this were the case, CELAS would need an admission as collecting society from the German Patent Office and would be blocked from collectively executing rights on behalf of right holders for as long as it has no admission. CELAS has asked the German Patent Office for such an admission in the past, but the office denied the application arguing that CELAS is not a collecting society. If the Regional Court of Munich and the German Patent Office maintain their contradictory views, CELAS may be in the absurd position to be forced to take legal action against the German Patent Office to get an admission and thereby the possibility to act as collective licensor for rightholders in Germany.