Cases C-403/08 and C-429/08 – Football Association Premier League Ltd. & others v. QC Leisure & Others; and Karen Murphy v. Media Protection Services Ltd.

On 4 October, the Court of Justice of the European Union (CJEU) handed down its hotly anticipated judgment in a landmark case that has pitted the commercial might of the English Football Association Premier League (FAPL) and the satellite broadcaster BSkyB against small 'grey market' importers of foreign satellite decoders into the UK and a Portsmouth publican, Karen Murphy. Although the approach taken by the CJEU in its judgment fundamentally challenges the existing model for territorial exploitation of rights in sporting events, it is not yet clear how far Mrs Murphy and other UK publicans will be able to rely on the ruling. In any event, the immediate media reaction that Mrs Murphy had "won" seems to be overly simplistic.

This case arises from two related references from the English High Court, under Article 267 of the Treaty on the Functioning of the European Union (TFEU), through which the English court sought clarification of the extent to which EU law prevents the FAPL from taking action to stop companies from buying satellite decoders in Greece (under subscription contracts that prohibited their use outside Greece) and subsequently selling those decoders, together with a Greek subscription, for use in public houses in the UK. Answering this question requires close analysis of a thicket of domestic and European law, as well as of the contracts between the FAPL and broadcasters.

As reported in our February client advisory, the Advocate General of the CJEU (who advises the judges on the relevant law) had recommended that the full Court rule that EU law did in fact prevent action by the FAPL, whether under UK statute or under its agreements with the Greek broadcaster whose decoders were being imported, to limit imports of Greek decoders into the UK. Although its reasoning differs in important aspects, the Court has effectively followed the approach of Advocate General Kokott in ruling that any laws or contractual provisions that seek to prevent cross-border trade within the EU in satellite decoders that have been lawfully placed on the market in one EU Member State are contrary to Treaty rules promoting free movement in services and prohibiting anticompetitive agreements.

Today's judgment involved detailed consideration of EU legislation that cannot be covered in a short client advisory. The thrust of the Court's approach can be seen clearly from key passages, however. In particular, the Court ruled that the current method of auctioning of football rights, based on absolute territorial exclusivity, leads to the partitioning of markets and "an artificial price difference", and that these results "are irreconcilable with the fundamental aim of the Treaty, which is completion of the internal market". The Court also noted with approval the goal of relevant European legislation, namely "to ensure the transition from national markets to a single programme production and distribution market".

It is particularly important for this case that, as noted by the Court, a football match is not protected by copyright, as such, since it is not the "intellectual creation" of an author. As a result, although the FAPL and its clubs can exploit matches commercially through their ability to control access to football grounds, they cannot rely on copyright law to limit the subsequent exploitation of coverage by broadcasters that have lawfully acquired the rights to show such matches, even if those rights have been acquired by broadcasters on the explicit basis that they are entitled to broadcast those matches only in one country. While the Court acknowledges that broadcasters do have rights to control communication of their broadcasts to the public, the issue before the CJEU in this case was not whether the Greek broadcaster holding the FAPL rights for Greece could stop UK publicans receiving its broadcasts but rather whether the FAPL could force the Greek broadcaster to prohibit such use. On that point, the Court's judgment was clear: it could not.

The only comfort for the FAPL is that the Court does recognise that it has copyright in those elements of the coverage that it has itself created, including the 'Premier League anthem', pre-recorded coverage showing highlights of recent matches and various graphics. This may be crucial, as the Court also recognised that the FAPL did have the right to stop UK publicans showing these elements of its coverage, when included in Greek broadcasts, since it retains the exclusive right to authorise the communication of its own copyright works to members of the public (which includes, for these purposes, drinkers in a pub). No doubt, parallel importers and creative publicans in the UK will be trying to find ways of showing foreign coverage of English football matches without including those aspects that the Court has recognised as FAPL's intellectual property, while the FAPL will be thinking up ways of making this impossible.

Importantly, the FAPL will have less scope to prevent UK domestic consumers from cancelling their Sky subscriptions and buying Greek decoders and subscriptions, since use in their own home does not involve communication to the public. In addition, the CJEU ruled that the domestic use of satellite decoders is able to benefit from a legal exemption that entitles limited reproduction of copyright works without infringement. The FAPL may get some comfort, however, from the fact that Greek subscriptions are apparently more expensive than a UK Sky subscription for domestic customers. As a result, the financial incentives are different from those affecting publicans, who must pay more than 20 times as much as a domestic subscription for the right to show Premier League matches in a pub.

It is now for the English High Court to apply the judgment of the CJEU to the specific facts of this case. While the High Court may find the approach of the CJEU unattractive, given that it overrides freely negotiated contractual provisions and adopts a narrow 'Continental' approach to defining the bounds of copyright law, its freedom of manoeuvre will be limited, given the detail of the judgment and the fact that the word of the CJEU is final on matters of EU law.

Given this outcome, the FAPL is likely to be forced to look again at the extent to which it can seek to persuade foreign broadcasters to assert their own rights to control exploitation of their broadcasts, without prohibiting sales outside the broadcaster's home country outright, which would fall foul of EU law. In the longer term, it will be interesting to see how the FAPL responds when it next auctions its broadcasting rights in 2013. In particular, will the FAPL adopt a pan-European model and, if it does, what impact will this have on its revenues? Will Sky win any pan-European rights, if tendered, or would this open up the field to foreign broadcasters to challenge Sky's UK dominance? It is clear that this case is far from over and continued uncertainty seems inevitable.

Looking more widely, the extent to which this judgment will have implications for the pan-European exploitation of other works that are protected by copyright, such as music, software or e-books is also unclear. Given that the approach of the CJEU is more fact-specific than that taken by the Advocate General back in February, the implications of this judgment outside sports broadcasting initially appear limited.

Observers will be left wondering how it can be that such a high level of uncertainty can exist over such fundamental legal and commercial issues. The answer lies in the tension between national intellectual property laws and EU-wide Treaty rules on free movement and competition, as well as the apparent inability of Member States to work with the European Commission to come up with a new legal framework supporting pan-European rights exploitation. Faced with such a state of affairs, it is perhaps understandable that the judges of the CJEU, which exists to uphold the Treaty rules, have taken things into their own hands.