On 5 November 2019 the Polish Constitutional Tribunal considered a legal question concerning the constitutionality of Article 79(1)(3)(b) of the Act on Copyright and Related Rights (ACRR) with respect to the right of the rightholder whose economic copyright has been infringed to request that the infringer remedy the damage inflicted by payment of twice the fee which would have been due for the rightholder’s consent for the use of the work as at the time at which the claim for payment was made (case P 14/19). Having examined the case, the Tribunal unanimously declared the provision to be consistent with the Polish Constitution.
The Supreme Court’s doubts
The question was submitted by the Supreme Court in connection with an appeal in cassation brought by a cable TV operator who, acting without a licensing agreement, had exploited audio-visual works managed by a collective management organization. The Supreme Court called into question Article 79(1)(3)(b) ACRR with respect to the permissibility of the award of damages in twice the amount of the fee which would have been due at the time it was sought if the rightholder had granted permission for the work to be used, observing that ever since the Constitutional Tribunal ruling of 23 June 2015 in case SK 23/14, the terms of this provision have raised many doubts and brought about divergent court decisions. The Supreme Court noted that the said ruling had no uniform interpretation in the case law and legal literature and that the constitutionality of Article 79(1)(3)(b) ACRR was a matter of dispute. The Supreme Court stressed that although the soundness of the provision was confirmed by the Court of Justice of the EU in its judgement of 25 January 2017 in case C-367/15, this does not preclude examination whether the provision is fair, equitable and proportional under national law. In this context, the Supreme Court pointed out that the Polish legislature had implemented a wide range of copyright protection measures. According to the Supreme Court, Article 79(1)(3)(b) ACRR in its current wording provides for a peculiar civil penalty and imposes absolute liability on the infringer as his liability depends only on the unlawfulness of his actions. Thus, the Supreme Court adopted the position that lump-sum damages in the amount of twice the appropriate fee had no compensatory function and could considerably and clearly exceed the value of the harm actually suffered, which in turn means that they constituted a disproportionate sanction.
The Constitutional Tribunal’s position in case P 14/19
In the oral statement of reasons for the decision, the Tribunal pointed out that Article 79(1)(3)(b) ACRR had already been the subject of review in case SK 32/14, decided on 23 June 2015. In that decision, the Tribunal deemed the provision unconstitutional in the way in which it entitled the rightholder to request payment of triple the amount of the appropriate fee. In its other rulings, the Tribunal frequently emphasised that, on the one hand, protection must be real and should be defined in law in such a manner as to enable its effective exercise. On the other hand, copyright protection cannot be absolute and is subject to limitations in compliance with the constitutional principles.
In the decision at issue, the Tribunal judged the provision allowing the rightholder to demand lump-sum compensation in double the appropriate fee not to interfere excessively either with the infringer’s property rights or with the principles of social justice guaranteed in the Constitution. It also observed that the protection of intangible rights, including copyright, is incommensurably more difficult than the protection of rights to material property. Such a differentiation in the protection of immaterial and material property rights was ruled consistent with the pursuit of the constitutional goal already in the 2015 decision.
Above all, the Tribunal emphasized that the rightholder whose copyright has been infringed is the weaker party in the legal relationship due to the difficulty in both finding the infringement and determining the value of the loss suffered. This justifies relieving him from the burden of identifying the precise extent of the loss and granting him the right to claim lump-sum damages. Without any doubt, the loss suffered equals the amount of the appropriate fee. When coupled with any other costs borne by the rightholder, immaterial losses, expenses necessary to identify the infringement, this sum adds up to lump-sum damages in double the amount of the fee. The Tribunal did not find a lump-sum payment defined in these terms to be completely detached from the size of the actual harm. In its opinion, such a regulation is effective from the perspective of the purpose that follows from the constitutional standards of review.
Thus, the Tribunal went on to assert that by authorising rightholders to claim lump-sum compensation in the amount of double the appropriate fee the Polish legislator did not violate the constitutional principle of the least onerous measure, and that Article 79(1)(3)(b) ACRR does not unduly encroach on the infringer’s property rights. Protection of a holder’s copyright will almost always entail interference with another party’s property right, justified both by the unlawfulness of the infringement and by the difficulty involved in identifying the infringement, as well as in proving the real value of the loss suffered. The Tribunal stated that although the provision allowing the rightholder to claim lump-sum compensation in the amount of double the appropriate fee is not the only legal means available to him, a repeal of Article 79(1)(3)(b) ACRR would result in inadequate protection of rightholders from copyright infringement. In particular, the Tribunal considered the remaining protection measures set out in Article 79 ACRR insufficient. Other claims available to copyright holders can in no way constitute a satisfactory solution to the evidentiary hurdles in determining the value of the loss suffered. These hurdles are not removed even if the rightholder is represented by a collective management organisation.
Having considered these arguments, the Tribunal found Article 79(1)(3)(b) ACRR in its current wording to be the only provision which alleviates the imbalance between the parties to the legal relationship in question. The Tribunal then noted that while the amount of twice the fee that would normally have applied may exceed the actual value of the loss suffered, it is not grossly incompatible with that value. This, in turn, allowed the Tribunal to declare the provision consistent with the Constitution.
Practical implications of the decision in case P 14/19
The Tribunal’s decision has serious consequences for legal practice as it dispels the doubts that emerged in the wake of the Tribunal’s ruling in case SK 32/14 with regard to the permissibility of claiming lump-sum damages for copyright infringement in double the amount of the appropriate fee. Admittedly, since seeking compensation equal to three times the appropriate fee was declared unconstitutional, there soon emerged case-law supporting the right to request payment of twice the fee (which corresponds to the actual wording of the provision), which was additionally confirmed by the judgement of the Court of Justice of the EU in case C-367/15. Nonetheless, views to the contrary were also expressed.
The Tribunal’s decision re-asserts that although the rightholder’s entitlement to claim lump-sum damages affects the position of both parties to the legal relationship, it is dictated by the need for special protection of copyright due to its specific character. The Polish copyright regulations provide for other claims available to the rightholder, yet – owing to the particular nature of property subject to copyright – they are insufficient. This observation is substantiated by the difficulties involved in determining the value of the harm caused. Given how easily immaterial property rights can be infringed and how difficult it is to establish the scale of the infringement, such a simplification of procedures for claiming compensation fosters copyright protection and has a preventive effect which does not deprive this measure of its civil-law status.
A situation where the amount of twice the appropriate fee does not exactly correspond to the value of the loss cannot be ruled out, which has been the main argument raised by the provision’s opponents. It ought to be emphasised, however, that in its judgement of 25 January 2017 in case C-367/15 the CJEU, confirming the provision’s compatibility with EU law, pointed out that “compensation calculated on the basis of twice the amount of the hypothetical royalty is not precisely proportional to the loss actually suffered by the injured party. That characteristic is inherent in any lump-sum compensation, like that expressly provided for in Article 13(1)(b) of Directive 2004/48.” The CJEU noted too that in cases where an intellectual property right has been infringed, mere payment of the hypothetical royalty is not capable of guaranteeing compensation in respect of all the loss actually suffered as payment of that royalty would not, in itself, ensure reimbursement of any costs – referred to in recital 26 of Directive 2004/48 – linked to researching and identifying possible acts of infringement, compensation for possible moral prejudice or payment of interest on the sums due.
Prior to the Tribunal's decision, there were two opposing positions in the Supreme Court's case law with respect to Article 79(1)(3)(b) ACRR. On the one hand, the soundness of this regulation was held to be beyond any doubt in the judgement of 7 December 2017 (case V CSK 145/17). The Supreme Court ruled therein explicitly that if the right to claim lump-sum compensation under the provision in question were to be limited to the actual value of the appropriate fee (e.g. a licence fee), not only would rightholders be unable to obtain full compensation for their loss, but also infringers would be placed in a privileged position with respect to those who make legal use of copyright-protected works. Copyright protection would become illusory, whereas infringers would simply find concluding copyright agreements economically unattractive. The Supreme Court noted further that the rightholder’s loss includes the costs of identifying the infringer as well as the costs incurred in connection with the proceedings. His loss clearly totals more than just the licence fee. The Supreme Court concluded that “the payment of twice the appropriate fee is consistent with the general sense of justice; considered acceptable in internal case-law and by the Constitutional Tribunal as well as by the Court of Justice of the EU, following a comparison of the Polish regulations with EU law, it is also given approval in the present case.” This has been the prevalent position in Polish case-law.
The opposite view was expressed in the Supreme Court’s judgement of 10 November 2017 in case V CSK 41/14, where it was held that under Article 79(1)(3)(b) ACRR the rightholder is entitled to compensation greater than the appropriate fee as long as he proves the exact amount of the harm, the causal link between the infringer’s actions and the harm suffered, and the infringer’s fault.
Having considered the relative ease of copyright infringement, difficulties in identifying such infringements and in determining the amount of the damage, as well as unlawfulness of the infringer’s conduct, the Constitutional Tribunal concluded that the right to claim damages in twice the amount of the appropriate fee is an effective protection measure and an interference proportionate to the nature of the infringement. The Tribunal’s decision of 5 November 2019 dispels any doubts that may have arisen in this matter.