On the 12 September 2014, the Court of Milan held that the activity of Soundreef, a small start-up carrying out a royalty collecting service, does not infringe Article 180 of the Italian Copyright Act (“ICA”) which provides that the intermediation activity is reserved on an exclusive basis to the Italian society of authors and publishers (“SIAE”).

First Instance Proceeding

Soundreef is a UK based company that gathers and distributes royalties on behalf of authors and publishers. It acts through two divisions: (i) “Soundreef In Store” which licenses music to be used in the stores; and (ii) “Soundreef Live” which allows the rights holders to register their tracks and to receive the royalties deriving from public performance.

The court expressed its concerns about the fact that the dispute had not been brought before court by SIAE but by a natural person, Laura Piccinelli (“Claimant”), acting as author, performer and phonogram producer of musical tracks.

The Claimant filed a precautionary injunction arguing that the activity of Soundreef allegedly infringed the exclusivity granted to SIAE.

The Court of Milan rejected the injunction as it considered the absence of the prerequisites of preliminary injunction claim consisting of (i) sufficient legal basis and (ii) danger of imminent and irreparable damage. It is also worth noting that in the judge’s opinion the Directive 2014/26/UE on collective rights management and multi-territorial licensing of musical works for online use reveals the obsolescence of the exclusive mandate granted to SIAE.

Appeal Proceedings

The Claimant filed an appeal against the order issued by the court based upon the following arguments:

  1. The infringement of the provision contained in Article 180 ICA also constitutes an unfair competition conduct causing an extra-contractual damage;
  2. The activity carried out by Soundreef caused to SIAE a loss of 23% of the revenues and indirectly a prejudice to the Claimant.

The defence of Soundreef was based on the following main arguments:

  1. The Claimant is not an entrepreneur acting in the market of the intermediation of rights and therefore is not legitimate to promote the proceeding;
  2. Soundreef does not carry out any intermediation activity in Italy. Its service is similar to a mere distribution of contents based on a mandate granted to Soundreef by foreign authors. Any restriction imposed by the national legislation is therefore illegitimate under the EU principles and in particular in light of the freedom of movement of services.

The appeal decision

The Court of Milan (in collegiate composition) acting as ‘appeal court’ ruled that there is no ground to consider the activity of Soundreef unlawful pursuant to Article 180 ICA.

The judge clarified that in accordance with the territorial principle, the exclusiveness granted to SIAE applies to musical compositions composed by Italian authors or by foreign authors domiciled in Italy and published for the first time in Italy (Article 185 ICA). Since most of the musical compositions managed by Soundreef are owned by foreign composers, it is necessary to conclude that the prerogatives of SIAE have not been infringed.

The Court of Milan also clarified that in compliance with the Berne Convention (“the enjoyment and the exercise of [the] rights shall not be subject to any formality”, Article 5.2), the ICA does not require upon authors, performers and artists to confer a mandate to SIAE.

The order of the Court of Milan does not rebuild the rules and it will not lead to the end of the monopoly of SIAE. Nevertheless, this adjudication is significant as it contributes to deconstructing certain positions aimed to expand the limits of the exclusive prerogatives attributed to SIAE beyond the letter of the applicable law.