Law on Copyright and Related Rights 1999
Constitutional Court ruling
Regulation on compensation
According to Lithuanian copyright legislation, copyright and related rights holders whose rights have been infringed have two options for the recovery of damages. They may seek recovery of material damages (ie, damages representing actual losses, lost profits or profits made by the infringer); alternatively, they may seek lump-sum (or statutory) damages up to twice the value of the licence fee or compensation.
In Lithuania, copyright and related rights holders generally seek compensation for infringement, rather than seeking to recover damages, as the Law on Copyright and Related Rights(1) sets simpler requirements to prove the amount of compensation, which generally makes court proceedings a more effective recourse. This practice has remained largely unchanged, despite amendments to the law in 2003(2) which altered the criteria for calculating compensation.
This update sets out the regulatory changes and considers alternative means of seeking compensation for copyright and related rights infringement; it also reviews the key points of a recent Constitutional Court ruling on compensation.
Law on Copyright and Related Rights 1999
Under Article 67(3) of the 1999 law, the amount of compensation was determined by the legal sale price of a particular work or an object of related rights (eg, a CD, DVD, book or item of software). This amount could be increased by up to 300% to reflect the culpability (ie, intent or negligence) of the infringer. The act stated:
"Instead of the recovery of losses, the owner of copyright or related rights may claim compensation, the amount of which shall be determined according to the legal selling price of an appropriate work or object of related rights, by increasing it up to 200%, or up to 300% if the infringer has committed the infringement intentionally."
Lithuanian law thus established limits on compensation for the infringement of copyright and related rights on the basis of the infringer's culpability.(3) Generally, where intent was shown, the courts awarded compensation equal to up to 150% of the legal sale price of the protected material.(4)
One of the most recent cases in which this method of compensation was applied involved the infringement of phonogram producers' rights. The Prosecutor's Office, defending the public interest, and the music production companies Sony BMG Entertainment Limited, EMI Records Limited and Virgin Records America Inc (among others) brought a civil claim against a Lithuanian company, Baltic Optical Disc, for allegedly producing illegal CDs. On August 22 2007 the Vilnius District Court found intent on the part of the defendant and awarded compensation on the basis of a sum equal to 300% of the legal sale price of the CDs - a total of approximately €450,000. Baltic Optical Disc appealed, asking the Court of Appeals to apply to the Constitutional Court for a decision on the constitutionality of Article 67(3), which established only one criterion (ie, the measure of culpability) to determine the amount of compensation. The Court of Appeals stayed the court proceedings and applied to the Constitutional Court to clarify the issue.
Constitutional Court ruling
On January 6 2011 the court rendered a decision which recognised the right to determine lump-sum damages (ie, statutory damages) for infringement of copyright and related rights; however, the calculation method was found to be unconstitutional.
Under the 1999 version of the law, the only criterion for applying an uplift of 200% or 300% was the nature of the infringer's culpability. The Constitutional Court endorsed Supreme Court practice and indicated that the concept of 'legal sale price', for the purpose of the relevant provision of the 1999 law, meant the market retail price. This, in turn, meant the ultimate cost of the item, including taxes (ie, the price paid by a consumer when purchasing a particular item).
The Constitutional Court held that the provision of the law was unconstitutional. It ruled that insofar as the regulation indicated the degree of culpability as the only criterion for increasing compensation, it created a condition for legal situations to arise in which a court's ability to implement justice would be impaired or negated.
The court found Article 67(3) of the 1999 version of the law to be in conflict with Article 109(1) of the Constitution - which declares that "justice shall be administered only by the courts" - and the constitutional principles of justice and of a state under the rule of law. It held that the means of protection of property rights is dependent on the nature of the property. According to the court, the legislature can establish different ways of protecting an owner's rights, including means that are related to compensation for losses. In regulating the compensation of losses due to infringement of copyright and related rights, the legislature is bound to respect the constitutional principle of the rule of law which - as the Constitutional Court has stated many times - is inseparable from the principles of transparency and legal certainty. Thus, a regulation established by law must be clear and the wording of the legislation must be precise in order to allow those subject to the law to act accordingly.
Two of nine judges(5) presented a separate opinion in which they found Article 67(3) of the 1999 version of the law to be unconstitutional in its entirety.
The Constitutional Court stated that the regulation established in Article 67(3), whereby the amount of compensation is calculated according to the legal sale price of the respective work or related rights object, does not prevent a court from ruling on the principles of justice, rationality, proportionality and other common principles of law regarding the protection of copyright and related rights, and thereby allowing for appropriate compensation of such losses.
The judges noted that the court had correctly held that such regulation, when the legal sale price of a relevant work or object of related rights is the criterion for calculating compensation, was vague and created uncertainty. However, unlike the rest of their colleagues, the two judges emphasised that the imprecise nature of the regulation was an essential point in this case. The judges held that the resulting uncertainty distorted the entire rationale of compensation and created the conditions for a person to misuse the right to claim compensation, as there was no clear method for calculating it.
The judges concluded that Article 67(3), whereby the compensation was determined by the legal sale price of an appropriate work or object of related rights, created conditions for the infringement of the rule of law, obstructed the constitutional principle of the recovery of material and moral losses and limited the courts' ability to dispense justice. On this basis, the judges considered the provision to be in conflict with Article 109(1) of the Constitution.
According to the 2003 version of the law, compensation for infringement of copyright and related rights can be claimed to a value of "up to 1,000 minimum living standards" (approximately €40,000). In setting the amount, the court may take into account the culpability of the infringer, its property status, the causes of the unlawful action and other circumstances that are relevant to the case, as well as the criteria of good faith, reasonableness and justice.
The current regulation of compensation appears to correspond to the Constitutional Court's ruling, as it indicates a number of criteria that the court should consider in determining the amount of compensation. Thus, it differs from the 1999 version of the law in giving judges broad competence to determine the limits of compensation. The regulation might appear less attractive for rights holders, in that the variety of factors potentially makes it harder to predict the amount of compensation that will ultimately be awarded. However, rightholders often use this approach, especially in piracy cases, as the Lithuanian courts generally apply the legal sale price of protected subject matter for determining the amounts of compensation, even though this is not mentioned among the set criteria. Moreover, according to Lithuanian case law, a rights holder is not required to prove what damage has been caused in compensation cases.(6)
For further information on this topic please contact Edita Ivanauskienė at Lideika, Petrauskas Valiunas ir partneriai LAWIN by telephone (+370 5 268 1888), fax (+370 5 212 5591) or email ([email protected]).
(1) Law VIII-1185 (OJ, 1999, 50-1598), valid from June 9 1999 with subsequent changes (OJ, 2000, 66-1985) valid from August 4 2000; 2003, 28-1125, valid from March 21 2003; 2006, 116-4400, valid from October 31 2006; 2008, 35-1243, valid from March 27 2008; 2010, 13-621, valid from February 2 2010).
(2) Law IX-1355, (OJ, 2003, 28-1125), which entered into force on March 21 2003.
(3) Ruling in Civil Case 3K-3-132; Supreme Court Ruling of September 8 2003 in Civil Case 3K-3-774/2003; referral of the Supreme Court February 22 2002, A3-64.
(4) Court of Appeal ruling on May 27 2003 in Civil Case 2A-204, on September 9 2002 in Civil Case 2A-207, on July 24 2003 in Civil Case 2A-159 and on June 10 2003 in Civil Case 2A-189.
(5) Judges Algirdas Taminskas and Toma Birmontienė.
(6) Supreme Court ruling of May 3 2006 in Civil Case 3K-3-311/2006.