Blanca Cortés, counsel of CMS in Spain, represents a Spanish television broadcaster in court proceedings filed by two collective management societies. The ruling adds itself to the nascent case law currently stating that royalties shall be determined on the basis of effective use of the works and contains several interesting remarks on the nature of phonograms which have been incorporated into complex artwork (i.e. audiovisual works).

The question

In a nutshell: If you broadcast phonograms, you are exploiting the exclusive intellectual property rights of their respective owners, some of which have to be compensated through the corresponding collective management societies. Must said compensation, however, be tied to flat rates unilaterally determined by said societies upon the users’ advertising revenues? Or should they respond to the effective use of the works? In addition, is the broadcaster obliged to compensate for the usage of phonograms included in audiovisual works such as films or television commercials, considering that the compensation to the phonogram’s rightholders has already been satisfied through a synchronization license?

The court's fundamental findings

Spanish collective management societies enjoy rights-based monopolies (i.e in almost every case there is only one society managing each kind of IP right). This situation favoured the unilateral establishing of general rates for the users based on diverse criteria other than the effective exploitation of the works and little room for negotiation.

The answer

In brief, the answer given by the court was that a TV broadcaster has to compensate rightholders for the effective exploitation of their works, and not on the basis of their advertising revenues. Additionally, and interpreting the Spanish Intellectual Property Act in light of the WIPO Performances and Phonograms Treaty (WPPT), a phonogram which has been incorporated into a different original work (generally an audiovisual work) forms an indivisible unity with the latter and, thus, is not a phonogram anymore. Hence, it shall not be taken into account when calculating the compensation for the broadcasting of phonograms by the TV broadcaster.