European Court finds that prohibitions on the sale and use of foreign decoder devices for viewing broadcasts of football matches are contrary to EU law, but holds that transmission in a pub of certain elements of such broadcasts requires prior authorisation under copyright law.

Summary

In June 2008, the question of the legality of the use of foreign decoder devices in the UK to enable access to foreign satellite transmissions of live Premier League football matches was referred to the Court of Justice of the European Union ("ECJ") by the High Court. The foreign decoder cards, which were supplied on terms which prohibited their use outside specified territories, were being used to show live matches (broadcast from Greece) in pubs and bars in the UK.

Following the previous opinion of Advocate General Kokott (see our previous newsflash here), the ECJ ruled on 4 October 2011 that contractual restrictions prohibiting the sale and use of decoder devices by a broadcaster in one Member State to enable viewers in another Member State to access its encrypted satellite broadcasts, and national legislation to this effect, are contrary to the competition and free movement provisions of EU law.

However, in respect of copyright questions, the ECJ departed from the Advocate General's opinion and ruled that transmission in a pub of broadcasts containing protected works (for example Premier League graphics or logos) constitutes a communication to the public requiring the prior authorisation of the author of the works (Football Association Premier League Ltd & others v QC Leisure & others; Karen Murphy v Media Protection Services Ltd, Judgment in Joined cases C-403/08 and C-429/08 click here).

Comment

In this judgment, the ECJ demonstrated clearly its single market objective, condemning both Member State measures and contractual arrangements entered into by undertakings which tend to fragment the internal market. It did, however, provide some protection for the rights-holders in respect of the question of prior authorisation of protected works.

It is now for the High Court to apply the ruling to the cases before it.

Despite the potentially wide-reaching impact of the decision in relation to the application of competition law to such exclusive licensing networks, the ECJ's judgment does reaffirm that exclusive territorial licensing is not in principle problematic, and it therefore remains to be seen how competition authorities and national courts will analyse other restrictions ancillary to such licensing and assess their compatibility with Article 101 TFEU in the circumstances of individual cases.

It also remains an open question as to how the ECJ's reasoning in respect of the broadcasting of football matches will be applied to other markets where digital rights are often licensed on a territorial basis (for example computer software, music, e-books or films made available via the internet, as envisaged by the Advocate General). No guidance was given by the ECJ in this regard.

Facts

The Football Association Premier League ("FAPL") (the governing body of the English Premier League) is the vehicle through which the Premier League clubs market the Premier League. It acquires ownership of various copyrights in the broadcasts of live Premier League matches.

FAPL grants its licensees the exclusive right to broadcast Premier League matches and to exploit them economically within their respective broadcasting areas (with licence fees varying by territory). To protect such exclusivity, each licensee is contractually obliged to encrypt the satellite signal provided to subscribers in its territory. Subscribers then require decoder devices to decrypt the signal; the licence agreement also imposes restrictions on the circulation of such devices outside the territory of each licensee.

In a 2008 preliminary reference, the High Court referred 18 questions to the ECJ, relating to the legality of attempts by the defendants to circumvent this exclusivity by the supply and use of lower priced foreign decoder cards in the UK, to enable access to Greek transmissions of live Premier League matches in pubs.

The ECJ gave its ruling on 4 October 2011, which largely follows (and in places refines) the earlier opinion of Advocate General Kokott, with some exceptions. The two cases will now return to the High Court for judgment. The High Court is required to give effect to the ECJ's judgment in deciding the questions addressed by the ECJ.

Judgment

1. "Illicit Devices"

The first question considered by the ECJ was whether decoder cards purchased in Greece and imported into the UK are prohibited "illicit devices" within the meaning of the Conditional Access Directive (Directive 98/84).

Under Article 2(e), an "illicit device" is said to mean any equipment or software designed or adapted to give access to a protected service in an intelligible form without the authorisation of the service provider.

The ECJ agreed with the Advocate General, holding that "illicit device" must be interpreted as not covering foreign decoding devices, foreign decoding devices procured or enabled by the provision of a false name and address, or foreign decoding devices which have been used in breach of a contractual limitation permitting their use only for private purposes. The ECJ held that all such devices are manufactured and put on the market with the authorisation of the service provider and do not allow access free of charge to protected services or facilitate the circumvention of technological measures designed to protect the remuneration of those services, since remuneration has been paid in the Member State where they have been placed on the market (in this case Greece).

Consequently, the ECJ held that neither the activities in question which resulted in the use of foreign decoder devices, nor national legislation prohibiting those devices, fall within the ambit of the Conditional Access Directive.

2. Free movement of services

The ECJ therefore went on to consider whether the EU free movement rules preclude national legislation which prohibits the use of foreign decoding devices, such as the relevant provisions of the UK Copyright, Designs and Patents Act 1988 at issue in this case.

The ECJ examined the questions in relation to the freedom to provide services (Article 56 TFEU), rather than goods, as the decoder cards are merely a means of obtaining access to a broadcasting service.

Restriction on the freedom to access services

The ECJ held that the UK legislation prevents use of foreign decoding devices and therefore prevents people resident in the UK from accessing satellite broadcasting services transmitted from another Member State (as access such services requires possession of a decoding device).

Although the ultimate source of the restriction lies in the contractual provisions which preclude the supply of Greek decoder cards for use in the UK, the ECJ found that the national legislation is restrictive in that it gives further effect to such contractual provisions.

The ECJ concluded on the basis of a brief analysis that such national legislation constitutes a restriction on the freedom to provide services which is prohibited by Article 56 TFEU unless objectively justified.

Objective justifications

The ECJ rejected the objective justifications put forward in this case:

  • the objective of encouraging the public to attend football stadiums (in connection with the prohibition on broadcasting football matches in the UK during the Saturday afternoon "close period"); and
  • the objective of protecting intellectual property (or similar) rights, by ensuring that rights-holders are appropriately remunerated.

In relation to the latter argument, the ECJ found that the restrictions were not necessary in order to ensure appropriate remuneration for the rights-holders, noting that the rights-holder in this case is remunerated for the broadcasting of the protected subject-matter (in the country of origin).

In particular, the ECJ held that the "premium" paid by rights-holders for absolute territorial protection cannot be regarded as being necessary to ensure appropriate remuneration for exploitation of the rights; this was on the basis that such absolute territorial exclusivity results in the partitioning of national markets and artificial price differences between markets, which is irreconcilable with the fundamental aims of the TFEU.

The ECJ also considered that the remuneration agreed between a rights-holder and broadcaster could be set so as take account of the potential audience in other Member States.

National legislation

The ECJ concluded that national legislation which makes it unlawful to import, sell and use foreign decoding devices which give access to encrypted satellite broadcasting services from another Member State is contrary to EU law.

3. Competition law

The ECJ also considered questions as to whether the exclusive licence agreement concluded between the FAPL as rights-holder and the broadcaster constituted a breach of the Article 101 TFEU prohibition on anti-competitive agreements.

Previous cases have recognised that, in light of the single market objective of Article 101 TFEU and in light of the importance, in many cases, of fostering intra-brand competition, an agreement which confers absolute territorial protection on a distributor may have the object or effect of restricting competition.

In the present case the ECJ considered whether licence agreements in respect of intellectual property rights which contain territorial restrictions (and, in particular, the arrangements for the broadcasting of FAPL matches which were before the Court) had the object (or effect) of restricting competition.

The ECJ noted that in order to assess whether the object of an agreement is anti-competitive, the agreement must be assessed by reference to its contents and objectives and the economic and legal context of which it forms part.

Noting its previous Coditel case law (Case 262/81) (in respect of the broadcast of films), the ECJ stated that the fact that a rights-holder grants to a licensee the exclusive right to broadcast protected subject-matter from a Member State is not, in itself, sufficient to establish that a licence agreement has an anti-competitive object.

However, citing its case-law on the parallel trade of pharmaceuticals, the ECJ recalled that agreements which are aimed at partitioning markets nationally or which make the interpenetration of national markets more difficult must be regarded as agreements which have the object of restricting competition.

The ECJ held that where a licence agreement contains territorial restrictions which are "designed to prohibit or limit the cross-border provision of broadcasting services", this will be regarded (without needing to consider the effect of the agreement on competition in practice) as having the object of restricting competition in breach of Article 101(1) TFEU, unless there are circumstances relating to the legal and economic context which would justify a finding that the relevant restrictions were not in fact liable to impair competition (which issue the ECJ said had not been addressed by the parties).

In this case the ECJ did not condemn the exclusive licences granted by the FAPL, but only what it regarded as the additional obligations on broadcasters not to supply decoding devices with a view to their use outside the territory covered by the licence agreement. This was on the basis that these provisions "prohibit broadcasters from effecting any cross-border provision of services", "granted absolute territorial exclusivity", and eliminated "all competition between broadcasters".

The ECJ found that the Article 101(3) exception would not apply here, for the same reasons as applied for the rejection of the objective justifications put forward in response to the free movement arguments.

The ECJ therefore concluded that, although exclusive licences may be granted in conformity with Article 101 TFEU, the ancillary prohibition on broadcasters supplying decoding devices with a view to their use outside the territory (designed to protect the system of exclusive licences) is prohibited by Article 101 TFEU.

4. Copyright

The ECJ then examined whether the reception of broadcasts containing Premier League matches and associated works, and their display on television screens, is subject to restriction by the Copyright Directive (Directive 2001/29):

  • by virtue of the fact that it results in reproductions of those works in the memory buffer of a satellite decoder and on a television screen; or
  • by reason of the showing of those works to the public by the proprietors of pubs.

As a preliminary matter, the ECJ noted (which was common ground between the parties) that there was no copyright in the live footage of the matches themselves. In principle the FAPL could not therefore restrict access to the on-pitch action on these grounds, only the associated works that it owns which do attract copyright (such as graphics, logos, pre-recorded highlights and the anthem music).

"Reproduction"

Under Article 2(a) of the Copyright Directive, Member States must provide for the exclusive right of authors to authorise or prohibit direct or indirect, temporary or permanent reproduction of their works by any means and in any forms. The ECJ held that "reproduction" extends to transient fragments of works within the memory of a satellite decoder or television screen, provided that those fragments contain elements which are the expression of the authors' own intellectual creation.

However, the ECJ further held that the temporary acts of reproduction in this case satisfied all conditions of the exemption under Article 5(1) of the Copyright Directive, including the requirement of having no independent economic significance, and therefore may be carried out without the copyright holders' authorisation.

"Communication to the Public"

Finally, the ECJ considered whether the showing of live transmissions of football matches in pubs represents "communication to the public…by wire or wireless means" under Article 3 of the Copyright Directive, which gives authors the exclusive right to authorise or prohibit any such communications, including the making available to the public of their works, in such a way that members of the public may access them from a place and at a time individually chosen by them.

Departing from the Advocate General's opinion, the ECJ held that "communication to the public" must be interpreted as covering the transmission of the broadcast works, via a television and speakers, to the customers present in a pub. The ECJ said that "communication" must be construed broadly, as referring to any transmission of the protected works, irrespective of the technical means or process used (making comparisons to the earlier ECJ case of SGAE v Rafael Hoteles SA where broadcasts were distributed to televisions in hotel rooms).

The ECJ stressed that the communication must be to a "new public", one which was not taken into account by the authors of the works when they authorised their use of the communication to the original public. The clientele of the public house in question constituted a new public for these purposes. Deviating from the Advocate General's opinion, the ECJ held that this public is not present at the place where the communication originates within the meaning of the Copyright Directive. It also considered relevant that the communication to the public in this case was of a profit-making nature.

As a result of this decision, transmission in a pub of broadcasts containing protected works (e.g. the graphics, logos, pre-recorded highlights and the anthem music) constitutes a communication to the public, requiring authorisation of the author of the works.

The ECJ's decision on these copyright issues is likely to be scrutinised very closely by those following the ITV Broadcasting Ltd and Ors v TV Catchup Ltd ([2011] EWHC 1874 (Pat)) case in relation to internet streaming of television broadcasts and films.