This article looks at the impact the European Commission inquiry into TV licensing arrangements with Hollywood film studios could have on sport’s TV licensing model. Craig Giles, an Associate with Bird & Bird, refreshes memories on the position regarding territorial licensing of sports content following the Court of Justice of the European Union’s (CJEU) ruling in the Murphy case. He also examines the application of the CJEU ruling by the UK courts, the next wave of FAPL action in the wake of the ruling and issues around commercial subscriptions to overseas broadcasters and whether their sale is being restricted.
The FA Premier League’s (FAPL) long-running battle with Portsmouth pub landlady Karen Murphy ended with both sides claiming a form of victory. Ms Murphy escaped criminal conviction for using an imported satellite decoder card to show a Greek TV broadcaster’s Premier League football programming, rather than the coverage from BSkyB (the FAPL’s official broadcaster in the UK). The FAPL received confirmation that it could rely on the inclusion of certain of its intellectual property rights contained in overseas satellite feeds to prevent those feeds from being broadcast in pubs and clubs in the UK.
The FAPL has achieved recent success in the courts against other publicans using unauthorised foreign satellite services to broadcast Premier League football matches. However, a new investigation by the European Commission into the territorial licensing arrangements between major Hollywood film studios and the leading European pay TV providers could have far-reaching consequences for all providers of premium television content.
A recap of the CJEU’s decision in Murphy
In the joined cases of Football Association Premier League v QC Leisure and Karen Murphy v. Media Protection Services Limited1, the Court of Justice of the European Union (CJEU) ruled that EU free movement of services and competition rules prohibited contractual provisions (and indeed national legislation) that prevent viewers in one EU Member State from importing satellite decoder devices from another Member State in order to watch the services of a foreign broadcaster. Whilst the FAPL could still grant rights on a territorial basis, the relevant provisions in the FAPL’s broadcasting licence agreements against the supply of decoding devices outside the contracted territory (in this case Greece) were artificially making that territorial exclusivity ‘absolute,’ and therefore infringed Article 101 TFEU. It was not possible to justify the restrictions on the basis that they were necessary to ensure appropriate remuneration for the FAPL, as when licensing its rights, the FAPL could take into consideration the actual and potential audience of the applicable broadcaster, both in its own Member State and in the other Member States in which its broadcasts could be received.
However, the CJEU also found that the screening of transmissions of the Greek broadcaster in UK pubs (as opposed to private residences) involved a ‘communication to the public’ within the meaning of Article 3(1) of the EU Copyright Directive that could amount to copyright infringement. This was on the basis that customers in the pub constituted a ‘new public’ to those considered by the copyright authors (i.e. FAPL) when they had authorised the Greek broadcaster to transmit the applicable copyright works (the opening video sequence, some pre-recorded highlights films and graphics). Whilst the CJEU did not provide any clear explanation as to why the pub customers should be considered a ‘new public,’ the effect of the decision was that the FAPL, as copyright holder, had a right to authorise and to require payment for the screenings by Ms. Murphy and other publicans.
Application by the UK courts
When the cases returned to the UK High Court2, the judge ruled that, whilst the pub owners had indeed communicated the copyright works to the public without the authorisation of the FAPL, there was an additional defence open to them under UK law. S.72(1)(c) of the Copyright Designs and Patents Act 1988 (CDPA) provides that the public showing of a broadcast does not infringe any copyright in any film included in that broadcast where the audience have not paid for admission. As the pub owners had not charged an entrance fee to their customers, they were able to avail themselves of this defence, at least in respect of the film element included in the broadcasts.
However, the court ruled that the section 72 defence applies to certain types of copyright materials - namely broadcasts, certain sound recordings and films - but not the underlying literary, musical or dramatic works. As such, it did not extend to the FAPL logo and other graphics included in the broadcasts, nor to the FAPL anthem, which is played before each match kicks off.
This meant that if the FAPL ensured that these forms of copyright materials were included in the broadcasts of its overseas licensees (e.g. by introducing ‘watermarks’ of the FAPL logo into coverage), and those materials were not removed or obscured when those broadcasts were made available in UK pubs, the FAPL could still claim that its copyright had been infringed. Whilst the scale of infringement was arguably minor - especially in comparison to a claim for copyright infringement in respect of the entire broadcast - it would open the possibility of the FAPL being awarded an injunction to prevent UK publicans from continuing to infringe its copyright.
Next wave of FAPL actions
The FAPL has recently relied on its logos and graphics contained in TV coverage to bring successful claims against two further publicans - Luxton3 and Berry4. Luxton had used a domestic satellite decoder card from Danish broadcaster Viasat to transmit Premier League football coverage in his pub. The FAPL was awarded summary judgment based on copyright infringement of the screen graphics and logos the FAPL had included in the feed of match coverage used for the Danish broadcasts. A key plank of Luxton’s defence was that his supplier had attempted to obtain a commercial subscription from a number of overseas EU broadcasters, but in each case had been refused on the grounds that the broadcasters believed this would put them in breach of their commitments to the FAPL (although it should be stressed that no evidence was provided that the FAPL’s contracts actually contained any such restrictions). Whilst the court found these responses ‘a cause for concern,’ it held they were not relevant for the purposes of determining copyright infringement - the case was on all fours with Murphy and the FAPL’s claim was successful.
The publican in Berry conceded liability for copyright infringement, so the issue before the court was limited to what costs the FAPL could recover on an interim basis, pending summary judgment. Here, the court held that the FAPL was justified in bringing a claim against Berry in the High Court (rather than a less expensive forum) as the FAPL’s potential remedies (damages or an account of profits) would be considerable - for example, by using a foreign domestic subscription to broadcast FAPL matches, Berry had avoided paying a commercial subscription of approximately £1,200 a month over a two year period. The Court also awarded the FAPL an interim payment of £65,000 on account of costs (which amounted to under half of the FAPL’s legal bill). Whilst the costs incurred by the FAPL in bringing the case against Berry may have been abnormally high as a result of the way Berry conducted the litigation5, the figure agreed by the courts is likely to cause publicans to think twice before purchasing domestic TV subscriptions from overseas broadcasters.
However, these recent cases highlight two issues that are likely to be crucial to future developments in this area. The first concerns clarifying the CJEU’s concept of a ‘new’ public. Would UK publicans still infringe the FAPL’s copyright if they purchased a commercial subscription from a foreign broadcaster, rather than a domestic one? In Luxton it was argued that the reason the CJEU considered the customers in a UK pub watching a Greek broadcaster’s Premier League coverage to be a ‘new’ public was because they were watching coverage from a domestic subscription rather than a (more expensive) commercial one - the CJEU would not have considered them to be a ‘new’ public on account of the pub being situated in the UK rather than Greece. Unfortunately, the court was not required to rule on this issue, as it was able to reach a decision based purely on copyright infringement, and so the issue remains unclear.
The second issue concerns the availability of commercial subscriptions. The evidence adduced in Luxton implies that - even in the absence of contractual restrictions - broadcasters are proving unwilling to sell commercial subscriptions to commercial establishments in other Member States (at least in respect of FAPL content). Luxton’s Barrister alleged that this amounted to the FAPL trying to maintain the status quo by covert means, despite the CJEU’s judgment in Murphy.
The new Commission investigation
It remains to be seen how European and national authorities will address these issues. However, the next front in the battle for territorial licensing could move away from the sports field and into the movies.
In January 2014, the European Commission announced that it had opened a competition investigation concerning the cross-border provision of pay TV services - in particular, the use of absolute territorial restrictions in the licensing agreements between a number of US film studios and EU pay TV broadcasters. Joaquín Almunia (the Vice President of the European Commission responsible for Competition Policy) stated that the investigation would focus on restrictions preventing unsolicited (or ‘passive’) sales of audio-visual services, and those restricting access to existing subscribers who move or travel abroad6.
The issue of access to audio-visual services for intra-EU migrants has concerned the Commission for some time. It recently appointed a consortium of market research companies to provide an economic analysis of the demand for cross-border pay TV services. The report estimated that there was a ‘willingness to pay’ for such services by intra-EU migrants of around €760 million to €1,610 million annually (being around 3% - 6% of the overall consumer spending on pay TV services in the EU)7. However, the report also concluded that under the territorial licensing model currently used in the EU, the costs required to operate a cross-border premium pay TV service aimed at these intra-EU migrants - including set-up and operational costs, the costs of doing business in other EU jurisdictions, and potential incremental rights costs - would likely render the service unprofitable. It seems this has caused the Commission to apply greater scrutiny to the legality of the traditional territorial licensing model, in particular in respect of the industry identified in the market research report as being of most interest to intra-EU migrants - the movies.
Planning for change
The results of the Commission’s investigation will be eagerly awaited by rights holders, pay TV providers and others involved in the delivery of premium audio-visual content on a territorial basis (whether for sport, movies, TV series or otherwise). If the Commission determines that the arrangements concluded between pay TV broadcasters and studios effectively eliminate competition, it may well take action to ensure absolute territorial restrictions between Member States are abolished in respect of all audio-visual content - irrespective of the platform used to deliver it (and hence including internet and mobile services as well as TV).
One way or another - whether through the Commission or the courts - it appears further change (or at least clarification) is inevitable, and affected parties would be well advised to plan ahead. If further inroads are made into the territorial licensing system currently adopted by many rights-holders and broadcasters, key considerations are likely to include:
- what factors, other than territory, can be used to differentiate between the services of different broadcast licensees - for example by specifying that rights may only be exploited in specified languages;
- using territorial limitation clauses which only prevent active sales outside the licensed territory, as opposed to an absolute restriction also covering passive sales in response to specific consumer requests (although such restrictions may be of limited commercial protection - especially when there are significant price differentials for a service between different EU Member States); and
- whether a rights holder will be able to achieve higher overall licence fees by limiting sales to broadcasters in key high-value markets (and potentially further limiting the broadcasters who are entitled to sell commercial subscriptions).
This article originally featured in World Sports Law Report Volume 12 Issue 6, June 2014. You can access the original by clicking here.