In five parallel matters decided by the German Federal Court of Justice October 7, 2009 and published by the court recently (case nos. I ZR 38/07, I ZR 39/07, I ZR 40/07, I ZR 41/07 and I ZR 230/06), the court further interpreted the provisions on appropriate remuneration for licensors in German copyright law. Since the German Copyright Act was amended in 2002, authors and creators have a legal right to appropriate and adequate remuneration under Sec. 32 German Copyright Act. If a license fee agreed to contractually is not found to be adequate, the author or creator can request the consent by the licensee to amend the license agreement in order to increase the agreed-to license fee.
While this provision may seem surprising, the legislative idea behind it was to grant sufficient protection to authors and creators who may be in a negotiating position that may not be sufficiently strong to be able to obtain reasonable and adequate payment for their work. This situation, in the opinion of the legislator, existed particularly with respect to literary translators. It is quite fitting in a way, therefore, that the recently decided cases all dealt with literary translators.
In the leading case among the five decided, a translator had prepared literary translations of two novels from English into German and been paid the contractually agreed-to fee of approximately €15 per page. She found this to be insufficient and requested that the agreement be amended appropriately. Interestingly, the Federal Court of Justice found that the payment of €15 per page was common in the industry at the time the agreement was concluded. At the same time, however, the court found that such a payment was inadequate because it did not reflect the reasonable interest of the translator to share in all forms of economic exploitation of the translation.
The Federal Court of Justice took the view that in order for license fees of literary translators to be reasonable, flat fee arrangements will usually not be sufficient if the rights granted are unlimited in time and scope. In addition, according to the court, it will be necessary, from a certain number of copies sold, to have the translator share in the revenue generated. The court decided that this had to be the case above 5,000 copies of the translated work sold. The share owed to the translator should then be 8 percent for hard cover editions and 4 percent for paperback issues (relating to the net retail price of the book). Additionally, according to the court, the translator is entitled to 50 percent of the net revenue generated by the publisher by granting third parties the right to use the translated work (relating to the value of the translation as part of the grant).
While the Federal Court of Justice took the view that the Court of Appeals had not finally determined whether the facts in this particular case warranted a deviation from the general framework set by the Federal Court of Justice, and the case has thus been remanded, the general framework set by the Federal Court of Justice will nevertheless now have to be taken into account in drafting license agreements under German copyright law in the future. This applies, in particular, to publishers working with translators. It will not apply to publishers and translators only, however. The respective provisions in the German Copyright Act are not limited to them. It can be taken from this recent case law by the German Federal Court of Justice that in all cases in which license agreements relate to long-term exploitation of works, the license fees should be structured in such a way that a proportionate share in the revenues generated by the author or creator is ensured. While the percentage amount set by the Federal Court of Justice in the recent case law will not apply uniformly to all forms of exploitation of all kinds of works, the general structure will have to be reflected. It is therefore not advisable to continue to use template license agreements without any proportionate share in revenue for the licensor (author/creator) if they are to cover long-term exploitations of certain works.