The Court of Justice of the European Union (ECJ) has delivered a landmark ruling which could substantially change the business models of broadcasters and content providers and reshape the way that live sports events and other media events are offered to consumers across Europe.
Joined cases C-403/08 Football Association Premier League Ltd and others v QC Leisure and others and C-429/08 Karen Murphy v Media Protection Services Ltd
The ECJ held that the English Football Association Premier League (FAPL), the body that licenses the broadcasting rights for English Premier League football matches, may not prohibit television viewers in one country from using decoder cards bought and imported from broadcasters in another country. This decision has implications for all rights holders that license their rights on a territorial basis. The ruling means that exclusive licence agreements that require a licensee not to broadcast outside the territory covered by its licence fall foul of EU law. If restrictions in place go beyond what is necessary to safeguard intellectual property rights, they cannot be justified on the grounds of protecting rights holders. Although the FAPL could not claim copyright in Premier League games, the ECJ held that the pre-recorded highlight sequences, graphics and accompanying music constitute «works» and are copyright protected. Finally, the ECJ ruled that the transmission of Premier League games in pubs and bars constitutes «communication to the public» for the purposes of EU copyright law, which requires consent from the rights holder.
Karen Murphy screens live broadcast Premier League football matches in the public house (pub) she is licensed to run in Portsmouth, UK. Until 2006 she bought those matches on subscription from the satellite broadcast rights-holder for the UK, BSkyB. Finding the subscriptions too high, she switched to showing matches using an imported Greek satellite decoder box and card, which allowed her to access foreign broadcasts at a lower price. A number of other pub licensees did the same.
The FAPL commercialises Premier League football matches by granting exclusive rights to broadcasters on a per-territory basis, requiring them (i) not to exploit their rights outside their allocated areas, (ii) to encrypt their programmes so that they cannot be seen outside their territory and (iii) not to sell decoding cards outside their territories.
When the FAPL found out about the use of foreign decoders in UK pubs, it took action against four pub licensees and the Greek suppliers of decoders in the English High Court, alleging breach of copyright and other intellectual property rights and breach of the UK Copyright, Designs and Patents Act 1988 (the Act). In the meantime, a private prosecution was brought against Mrs Murphy in the High Court, under the criminal provisions of the Act.
In both cases, the licensees and Greek suppliers used “Euro” defences, arguing:
- that preventing them from using decoders in the UK restricted the freedom of non-UK broadcasters to provide goods or services in the UK, a fundamental freedom protected by the Treaty on the Functioning of the European Union (TFEU); and
- that the exclusive licences entered into by the FAPL with non-UK broadcasters breached competition law because they prohibited those broadcasters from supplying decoder cards for use in the UK and so limited the markets in which those broadcasters could make sales.
The High Court referred to the ECJ a number of questions on the compatibility of the FAPL’s licence terms with EU law.
The ECJ ruling
The ECJ’s ruling was foreshadowed by the Opinion issued on February 3, 2011 by the Advocate General in the case, Juliane Kokott. Her view was that the FAPL’s licence terms partitioned national markets and were contrary to common market principles. This partitioning restricted or distorted competition among national broadcasters, contrary to the prohibition on anti-competitive agreements, in Article 101 TFEU.
The ECJ’s ruling was issued on October 4, 2011. The key points in the judgment are as follows:
- An exclusive broadcasting agreement is not in itself anti-competitive (Coditel II, C-262/81). Therefore, a holder of broadcasting rights may give exclusivity to a single licensee for one or several Member States.
- However, any contractual provision aimed at conferring absolute exclusivity in a national market and making the penetration of that national market difficult for competitors from outside the territory contravene common market principles and the EU prohibition on anti-competitive agreements, in Article 101 TFEU.
- The contracts concluded by the FAPL with broadcasters were restrictive by their very nature (or “object”) and so could not qualify for exemption from Article 101 TFEU. Therefore, it is probable that the FAPL will be obliged to modify all the contracts in their entirety, which will mean renegotiating terms with broadcasters.
- The restrictions imposed by the FAPL could not be justified on the basis that they protect the rights of the intellectual property holders by ensuring that they are appropriately remunerated. EU law provides only for rights holders to be “appropriately” remunerated, and the payment of a premium by broadcasters to secure exclusive territorial rights goes beyond what is necessary, resulting in artificial price differences between national markets that are irreconcilable with the fundamental EC Treaty aim of creating an internal, common market.
- National legislation (such as the Act) that makes it unlawful to import, sell and use foreign decoding devices that give access to broadcasts from another Member State constitutes “a restriction on the freedom to provide services” and is prohibited by Article 56 TFEU.
- There is no copyright in sports matches themselves but there is copyright in the opening video sequence, Premier League anthem, pre-recorded highlights and onscreen graphics, which can be considered “works”. This means that …
- The screening of Premier League matches in pubs and bars constitutes “communication to the public” within the meaning of the Copyright Directive, and the authorisation of rights holders is therefore necessary in order to show the works.
This judgment undoubtedly represents a significant challenge to the business models used by the Premier League and other rights holders that license their content on an exclusive territorial basis – not only in broadcasting, but also in other industries, for example, the audiovisual and film industries.
Those rights holders will no longer have the certainty that they will not face competition in their territory from operators licensed in neighboring Member States.
Although the ECJ’s judgment seems to pave the way for householders to use foreign decoding devices to view Premier League games at home, the FAPL may seek in future to license rights on a pan-European basis (as suggested in the Opinion of the Advocate General), and this could result in less flexibility in pricing and in the cost of viewing matches being fixed at the highest possible price achievable across the EU.
The position is more complicated for pubs and bars, which the ECJ ruled were subject to certain provisions of copyright law. Although it is for the UK High Court to take a decision on Mrs Murphy’s case and the case of the other four licensees, it is unlikely to differ much from the ruling of the ECJ. How the ECJ’s ruling is applied by the High Court will be viewed with interest by the owners of pubs and bars, who will be looking to see whether there is scope for them to use imported decoders in their premises. It has been suggested that a possible solution for pubs and bars would be to limit their screening of games to the match only, excluding all opening sequences and highlights packages. The Premier League may seek to prevent this activity, however, by embedding more copyright-protected material into the presentation of the matches.
This decision will undoubtedly also have an impact on football clubs, which receive a share of the revenues generated from the sale of football broadcasting rights.