The German Federal Court of Justice decided in a decision of June 10, 2009 (file no. I ZR 226/06, published with full opinion only November 30, 2009), that the German collecting society for musical rights, GEMA, is currently not competent to license rights of its members regarding the use of musical works in advertising.

In the case to be decided, an advertising agency wanted to use commercials with background music for its own marketing purposes on its Internet website. GEMA had asked for payment of license fees for this use. The advertising agency refused to make payment and brought a declaratory action claiming that GEMA did not have the right to request information and/or payment of royalties from the advertising agency for the use of musical works as part of commercials made for the customers, nor for the use of the commercials for marketing purposes on the website of the advertising agency. The Federal Court of Justice had to decide whether such use for marketing purposes is covered by the exploitation rights granted to GEMA and therefore subject to royalty payments to GEMA.

The Federal Court of Justice took the view that this is not the case, and argued that the current version of the license agreement by which the right-holders grant certain rights of use and exploitation to GEMA does not include rights of the GEMA members concerning the use of their music for advertising purposes. With the license agreements, the right-holders grant GEMA various rights for administration that are spelled out in the license agreement, not including, however, the right to use musical works for advertising purposes. This right has neither been expressly granted to GEMA, nor does it have to be regarded as included in the contractual aim defined by both parties because, according to the Federal Court of Justice, copyright owners are perfectly able to administer the right of use of their works for advertising purposes themselves. In the case of use of works for advertising purposes, the possibility to negotiate license fees individually is in the best interest of right-holders, according to the court, which is why subjecting such use to tariffs or distribution models of GEMA would be contrary to such interest.

This decision came as a surprise both to GEMA and the music industry. It does not fit with the idea of using GEMA as a “one stop shop” for obtaining rights to use of music from GEMA members. Advertisers who would like to use music of GEMA members are currently forced to contact the right-holders directly, which can lead to practical difficulties and make clearance of rights significantly more complicated. GEMA intends to get in touch with its members in order to obtain subsequent approvals for grants of rights made in the past, and to find a practical solution for the future by amending the license agreement with its members to include uses in advertising.