Limitation on Grant of Exploitation Rights
The introduction of DVDs (digital video discs) has been one of the most successful innovations in the media industry in recent years. However, the particularities of the German Copyright Act could prove to be a serious barrier to further success. This update outlines the relevant legal provisions, explains their intended purpose and practical effect, and examines their impact on the media industry in light of a recent Munich District Court decision.
Limitation on Grant of Exploitation Rights
According to Section 29 of the Copyright Act, copyright is inalienable. However, the act does allow for authors to grant certain rights of use by way of contract. Section 31(1) allows the author to grant a right to a third party to use the work either in a particular manner or in any manner (exploitation right).
Crucially, Section 31(4) contains the following limitation on the copyright holder's contractual ability to grant rights of use for future media: "The grant of an exploitation right for as yet unknown types of use and any obligations in that respect shall have no legal effect."
This provision was introduced in 1966 and applies only to contracts that were concluded after January 1 1966. As a result of the limitation, even if an author intended to grant, for example, a right of reproduction for all existing and future media, the grant would be considered void for all types of use unknown at the time that the contract was concluded. Consequently, the grant of a right to reproduce a work on DVD will be void if this reproduction can be considered to be an independent type of use and a type of use unknown at the time of the contract's conclusion.
The provision was introduced with the aim of protecting the author. The legislative history shows that the legislator intended to protect authors from assigning a right whose commercial value could not be determined or appreciated at the time of contracting.
Subsequent court decisions have established guidelines for the interpretation of the terms 'type of use' and 'unknown'. In the decisive GEMA-Vermutung I Case (1985) the Federal High Court explained that in order to be considered a 'type of use' in the sense of Section 31(4) of the Copyright Act, the use of the work must be a technically and commercially independent form of exploitation of the work. The next step is to assess whether this type of use was known at the time that the contract was concluded. In order to be considered 'known', it must be "technically feasible and commercially relevant".
In the Klimbim Case (1996) the Federal High Court demonstrated a more restrictive approach to the interpretation of the provision. In this case the court concluded that satellite broadcasting was not an independent use type with regards to terrestrial broadcasting. The court instead found it to be simply a technical extension of existing broadcasting methods.
In order to ensure some contractual freedom as well as technical advancement, copyright holders may expressly allow the use of their work in a technically known but not yet commercially significant medium. These are referred to as 'risk contracts'. However, it is a prerequisite that the type of use must have been the express subject of negotiations and must be explicitly named in the contract.
In the recent case of Luedi v Kinowelt the Munich District Court held that DVDs cannot be considered a mere technical extension or a successor medium to conventional video cassette recordings within the meaning of Klimbim. The court listed the various attributes of DVDs - such as their interactive nature and high-quality image and sound reproduction, as well as their potential storage capacity - and concluded that these were all significant differences from existing video cassette recordings. It held that the DVD allows for a much more intensive use of the work. The court did not explicitly determine a point in time at which DVDs became 'known', but only stated that they certainly were not known in 1980. The decision, as it stands, would have the effect that, for example, a director of a film - who is considered to be one of its authors under German copyright law - could prevent the distribution of DVDs of that film if the contract through which he assigned his rights to the film was concluded in the 1980s. As Kinowelt has lodged an appeal against the judgment, the Munich court's ruling is hopefully only a stepping stone to a definitive Federal High Court decision.
The prohibition against granting rights to unknown types of use of a work is unique to Germany. As can be seen in the case of DVDs, the provision creates legal uncertainty for the users of copyrighted works and consequently hinders technical innovation. The legislator does not seem to take advantage of the latest reform of the Copyright Act, which will come into force at the end of the year, to abolish this controversial provision. While the media industry must live with this barrier, a definitive Federal High Court decision is urgently needed to resolve the question of whether reproduction of a work on DVD is a new type of use.
For further information on this topic please contact Ulrich Michel at Nörr Stiefenhofer Lutz by telephone (+49 30 2094 2000) or by fax (+49 30 2094 2094) or by email ([email protected]).