Murphy v. Media Protection Services

This case, about the ability of British pubs to screen live Premier League football broadcast from other EU countries, questions the way content has been distributed in Europe. The questions it raises go far beyond sports rights with the potential to revolutionise the way in which the media industry operates in Europe.

Although some elements of the case are highly technical, at the same time the issues it looked at were at their heart extremely simple and reflect fundamental changes in the media world.

Background

Traditionally, broadcast rights for most valuable content, such as films, sports and high-end TV shows, have been distributed country by country. There is an obvious reason for this - the vast majority of broadcasters operated nationally providing services tailored to a specific country's language and culture over networks built to broadcast specifically to that country.

Within each country, commercial practices emerged for the licensing of the content - for example, a pay-TV channel might show the content first, followed by a leading free to air channel, followed by ongoing showings on other channels.

This system worked in a world where the broadcasting of content is naturally confined within geographical borders (because it is tied by the cable or terrestrial network on which it is broadcast) and there is little consumer or commercial pressure to move content across national borders (because of language or cultural features in the content).

Over the last 15 years there has been a fundamental change in this pattern. Increasingly it has become possible for content to flow across EU borders either because it is broadcast over a satellite with a footprint which is much larger than a single country or, more fundamentally, it is being made available over online services such as Apple's iTunes.

Whereas traditional broadcast networks were inherently limited to an individual country, web and satellite services are not. The operators have to impose artificial technical restrictions via set-top boxes, smartcards and the "geoblocking" of online services to prevent viewers outside the target country accessing the services.

Key point

  • 30 years ago television showings were possible, in purely practical terms, only in the context of national monopolies inherently tied to individual countries. Now there is growing demand and capability for content to flow across borders.

At the same time, content has become more culturally fungible within the EU with the increasing prominence of international sporting and other events accompanied by the rise of English as a common second language for a significant part of the European population.

Why did the case arise?

Football Association Premier League Ltd ("FAPL") currently grants a series of exclusive territorial broadcast licenses for its Premier League football games. The principal licensees were BSkyB and ESPN which bought the UK rights; amongst the other European broadcasters who received territorial licenses was NetMed Hellas, a Greek satellite broadcaster.

The principal practical trigger for the case was the differential in the value of the rights themselves in the UK and elsewhere.

There is a significantly enhanced demand for Premier League coverage in the tournament's home territory than elsewhere, with the result that BSkyB and ESPN both charged their subscribers significantly higher prices to view games than were charged by broadcasters elsewhere in Europe.

The FAPL's contracts entrenched this situation. They required the broadcaster in each territory to ensure that only viewers in that territory could view their games. In particular the Greek broadcaster was required to prevent its decoder cards being used by viewers to watch its broadcasts outside its licensed territory.

This was underpinned by provision in the UK's Copyright Designs and Patents Act 1988 ("CDPA") which create criminal sanctions for use of foreign decoder equipment in these circumstances.

Certain pubs in the United Kingdom, aided by intermediaries, began to acquire decoder cards issued by the Greek broadcaster. This was done even though the Greek broadcaster's terms and conditions prohibited use of its decoder cards outside Greece.

The pubs in question used these decoder cards to show Premier League matches within the UK at a substantially lower cost than if they had paid BSkyB or ESPN, the UK broadcast rights holders.

Key points

  • UK publicans used Greek decoder cards to show Premier League games even though that was prohibited by the terms and conditions applying to those cards
  • They did this because it was much cheaper to buy a card to watch the Greek broadcast than to watch anEnglish one

The case itself

The Premier League tried to stop UK pubs sidestepping its system of territorial exclusivity by bringing a mix of private prosecutions and civil actions against the offending pubs and the suppliers of the decoders.

These actions considered a significant number of issues including whether the use of the decoders breached any intellectual property rights of FAPL, the nature of intellectual property rights in the broadcast, whether decoders obtained in breach of contract were "illicit devices" for the purposes of the Conditional Access Directive and the impact of EU rules on free movement of goods and services.

As a result, five years ago pub landlady Karen Murphy was ordered to pay nearly £8,000 in fines and costs by a UK court after being convicted for showing live Premier League matches in her Portsmouth pub, using a satellite decoder issued by a Greek broadcaster. She had cancelled her BSkyB subscription, which cost about £6,000 per year, and bought a subscription to a Greek broadcaster, costing about £800 per year.

Karen Murphy took her case to the ECJ and on 4 October 2011 the ECJ handed down its final judgment.

Some key points from the judgment

  • A decoder card will not be treated as an "illicit" device for the purposes of the Conditional Access Directive simply because false information (eg name and address) is used to obtain it. As a result the Directive itself neither imposes a mandatory requirement on member states to prohibit the use of such devices nor prevents member states introducing laws which prohibit their use. It is worth noting in passing that where the provision of false information constitutes a breach of terms and conditions attached to the card there may be possible claims for breach of contract against those involved
  • Because the use of decoder cards is an integral part of the service of providing content, any restrictions on their sale fall to be assessed under the rules in the Treaty on the Functioning of the EU ("TFEU") applying to the free movement of the services
  • Provisions of the exclusive territorial licences themselves and the provisions of the CDPA which entrench a prohibition on the use of decoder cards in these circumstances, in principle, impose restrictions which are inconsistent with provisions of the TFEU which are intended to ensure the freedom to provide services and the free movement of those services

Key point

  • The ECJ decided that content licences imposing absolute obligations to restrict viewing to an assigned territory, and laws of individual member states supporting such arrangements, breach basic EU rules on freedom to provide services and the free movement of services and the competition rules.
  • Those restrictions cannot be justified to protect any interest the FAPL have in the intellectual property content of the broadcast of the game themselves. In this context, the court expressed the view that any legitimate interest the FAPL may have in the intellectual property in coverage of the matches does not extend to charging a premium for territorial exclusivity of exploitation of those matches
  • The ECJ took the same line in applying the competition rules of the TFEU. The ECJ did not find that licences with an element of exclusivity were in breach of competition law, but did rule that an absolute territorial restriction was illegal

While the competition law reasoning followed the same logic as the freedom of services element of the judgment, it has implications for the sort of cases which may be brought in the future. Individuals and companies can bring private claims directly based upon harm suffered as a result of breach of the competition rules.

  • The restrictions are also not justified by an objective of protecting attendances at matches themselves. That protection could be achieved more appropriately by restrictions on the timing of coverage
  • When a pub plays out a broadcast, this in itself involves a "communication to the public". If the broadcast includes FAPL intellectual property, such as a Premier League logo and anthem, this would potentially require FAPL authorisation.

The findings now go back to the High Court for a final ruling.

Does the case decide everything?

No.

There are a number of particular features of the case. These mean the final outcome is still in doubt. They also mean it is not straightforward simply to extend the case beyond the particular facts.

However, the thrust of the case is to apply mainstream EU principles to licences of content. In the world of the supply of goods, including, for example, DVD's, it is generally not possible for a manufacturer to prohibit a local distributor or retailer from accepting orders from another part of the EU (although a ban on soliciting such orders is generally permissible).

This case reinforces the view that content services are not inherently to be given special treatment simply because they involve the distribution of content which is protected by intellectual property rights. In that sense, the case points fairly strongly to a likely direction of travel of EU law which is likely to have wide ranging application.

Is the judgment confined to sports rights?

There is no reason to consider that the basic principles of the case apply only to sports rights. They could equally well apply to any other form of content.

However, the ECJ appears to have been influenced to a degree by the limited nature of any intellectual property rights which sports rights holders have (in that, for example, there is limited creative input into the spectacle being broadcast).

It therefore remains to be seen whether it would be possible to draw any distinction with more traditional created/produced works such as motion pictures.

Is the judgment confined to satellite television?

Some elements of this case deal specifically with particular features of satellite television.

However, there appears to be no reason why the basic principles should not apply equally to other systems of broadcasting and distribution of content, including online services.

Potentially, for example, this could give rise to issues where a content licensor wants to licence content in one country to a free ad-funded online service and to a subscription service in another country (for example, where the free and pay markets in different countries have evolved differently).

It may prove difficult to ensure customers in the "pay country" do not simply obtain the content from the "free country".

Are pubs (and other businesses) in a special position?

Ironically, the conclusion that playout in a pub involves communication to the public could mean Mrs. Murphy is in a worse position than her customers.

Potentially rights holders could seek to brand their content at all times (eg displaying a Premier League logo) and charge businesses for displaying that branding.

It is questionable whether this approach would succeed but in any event it is very unlikely to apply where an individual consumer watches content at home.

Are exclusive territorial licences now impossible?

The basic thrust of the case is against absolute territoriality (ie arrangements which are aimed at making it impossible for a broadcast containing certain content to be viewed outside a pre-determined territory).

Although not addressed by the ECJ, it is unlikely that a licence which assigned a territory to a broadcaster and prohibited the broadcaster from actively targeting its services at another territory would be problematic.

Similarly, prohibitions on changing content (eg producing foreign language versions to make it more attractive to viewers outside the assigned territory) are likely to remain permissible.

Must broadcasters and content service providers price equally across the EU?

At its core, this case is about the terms on which content owners licence broadcasters and other local distributors of their content.

It is therefore not directly relevant to pricing decisions by broadcasters. So this case would not necessarily prevent a broadcaster with operations in the UK and Greece from buying EU wide rights to the Premier League and charging more for the people to view the games in the UK than they do if people view the games in Greece.

That said, the EU authorities have previously looked at similar issues and are clearly on the look-out for evidence that differential pricing may constitute an abuse of dominance or other anti-competitive activity. So any differential pricing strategy would need to be considered carefully.

Are there issues for current agreements?

In circumstances where the judgment is applicable, absolute exclusivity restrictions are likely to prove unenforceable.

It is in the nature of territorial exclusivity that it involves a network of contracts in which the rights holder requires exclusivity of each licensee and, in turn, promises each licensee that it will secure equivalent exclusivity from all other licensees.

It is therefore probable that where the principles of the case are applicable, both the licensor and all licensees will be affected.

It is also possible that in some cases the judgment may have different implications for different agreements dependent on their particular facts. As a result it may be the case that the falling away of an exclusivity undertaking in one agreement results in a party being in breach of another agreement.

What are the longer term commercial options?

The longer term commercial response requires careful consideration. As described above, the case may well not apply in exactly the same way in every circumstance.

Equally it is important not to overstate the commercial significance of the judgment, which is likely to be most significant where the content involved is relatively easy to consume across borders.

However, some of the options which appear worthy of consideration are:

  • Enhanced and/or more explicit provisions dealing with modification of content (eg a prohibition on modifying the language of presentation). However, this is unlikely to help with content which is relatively portable (sports and music) and may be of limited effect in relation to English language content being accessed from across the EU
  • Restrictions on licensees actively promoting their services outside specific territories. However, it is likely that where there are substantial price differentials, intermediaries will take on this role. This is what had happened in the Murphy case
  • Single licensee deals in which a broadcaster or service provider with presence in multiple EU markets buys rights to exploit that content across the EU and then manages its commercial model of exploitation internally
  • Entirely new distribution models in which multiple licensees are not limited to a particular territory within the EU but charged a royalty calculated differentially by reference to where the content is accessed (eg a higher royalty per UK or German subscriber than per Greek subscriber)
  • Greater alignment of commercial practices. For example, aligning "pay" and "free" release windows across the EU to reduce the likelihood that pay licensees may be undermined by licensees offering the content free elsewhere at the same time.