From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Friday, 28 April 2017

BGH on the freedom of the seas, ahm, panorama

AIDA "kissing lips"
The freedom of panorama - an exception to copyright protection that permits depicting buildings and sometimes sculptures and other art works which are permanently located in a public place without the copyright's owner's permission - is an area of law in Europe that is so far not harmonized, and while some countries recognize the freedom of panorama,  others don't. The draft Directive on Copyright in the Single Digital Market does not provide for a compulsory freedom of panorama exception, despite a public consultation on the issue.

Germany is a member state that recognizes freedom of panorama in its national law. § 59(1) German Copyright Act reads (in an unofficial translation):
It is permissible to reproduce, disseminate and publicly reproduce works, which are permanently on public paths, streets or squares, by means of painting or graphics, by means of photographs or by film.
Feliks Büttner is the designer of the "kissing lips" painted on the bow of every cruise ship by the operator AIDA. He assigned the exclusive rights of use to AIDA. AIDA sued an operator of a website that offered excursions in connection with cruises and depicted an AIDA cruise ship with the kissing lips design. The website operator tried to avail itself of the freedom of panorama. AIDA argued that the "kissing lips" were not permanently on display in a public place, as the cruise ships moved about. In any case, the art work was not on display on a path, street or square, but rather on water...

Art on a truck.
The BGH sided with the defendant. § 59(1) was to be interpreted such that a work was display "on a public street" if it was visible from any place under the open sky accessible to the general public. This includes a harbor, although "harbour" was not specifically mentioned in the wording of the article. A work was "permanently" present in a public place even if it moved about, as long as it was destined to be in some public place for a prolonged period of time ("längere Zeit". Why this has to be assessed through the eyes of the general public, as the BGH indicates, and is not an objective standard eludes me).

The freedom of panorama therefore includes art on cruise ships, but more importantly, also art on cars, trucks, lorries, busses, street cars and other means of transportation. Therein lies the importance of this decision, since in a modern urban environment, it is almost impossible to take a picture without depicting some copyright protected work affixed to some form of transportation.

Decision of 27 April 2017 - I ZR 247/15 - AIDA Kussmund (only the media release has been published so far)

ESPN: When Teflon is not enough in the face of platform disruption

In the world of media, the mantra for over a generation has been— “pity the poor daily print newspaper”, which became the poster child for media disruption in the on-line world. With much news, once provided by newspapers now available free on-line, reader subscriptions have declined, leading to a drop in advertising revenues, resulting in staff cut-backs and less content, leading to a further drop in subscribers, and so on.

No one in the media industry has stood more in contrast to the newspapers than the sports broadcasting business, and no company within sports broadcasting has cast a larger shadow than ESPN. Owned by Disney, ESPN has been perhaps the major source of steady revenues for the Disney empire. While the commercial fortunes of Disney’s creative content offerings ebb and flow, ESPN has provided consistent and respectable revenues. After all, the contents of sports broadcasts are unique. They must be consumed in real time (who wants to watch yesterday’s football match?), the demographics are an advertiser’s dream, and the exclusive nature of broadcasting rights promises to bring top dollar contracts between the broadcaster and the various sports leagues.

The diminishing number of newspaper reporters, virtually unknown to the wider public, drink coffee from plastic cups and operate in tiny cubicles; sports broadcasters sit in fancy studios and present to tens of millions of viewers, all the while projecting a sense of understated in-studio cool. Pity the poor newspapers and their staff, another example of an “oh-so-yesterday” form of media with an outdated business model.

Well, not exactly. As widely reported earlier this week, including by The New York Times, ESPN has laid off what is described as “scores of journalists and on-air talent.”. They include the firing (or, as they say in England, “being made redundant”) of former American football players such as Trent Dilfer, who won a Super Bowl ring while playing quarterback for the Baltimore Ravens, and professional basketball player Len Elmore. It appears that the move was made overnight—here today, gone tomorrow.

So, what is behind the move? After all, The New York Times describes ESPN as “by far the biggest and most powerful entity in the sports media industry.” Certainly, there is a degree of truth in saying that sports broadcasting differs from the newspaper business. But that difference turns out to be more of degree than of kind. James Andrew Miller, the author of a book about ESPN, observed that “ESPN was wrapped in Teflon for many years.” But as everyone knows, there is nothing ultimately impregnable about a Teflon coating.

For ESPN, the Teflon ceased to be effective in the face of two factors. First, ESPN had entered into humongous deals to acquire broadcasting rights for various sports, such as the National Football League (eight years, $15.2 billion dollars) and the National Basketball Association (nine years, $12 billion dollars). Of course, no one forced ESPN to agree to such amounts; presumably, it did the calculations and came away convinced that the sums were reasonable.

However, in so doing, ESPN seems to have misread where consumer viewer habits were going in the face of changing communication platforms. In a manner not dissimilar to the failure of the print media to correctly understand the implications of internet connectivity for disrupting traditional newspaper reading habits, ESPN misgauged the durability of cable as the preferred sports viewing platform. In a word, viewers are more and more “cutting the cable”, in part, due to increasing resistance to the multi-channel, bundle acquisition cable model and the seemingly ever-increasing cable subscription fees; in part, due to the increasing popularity of streaming as an alternative channel of distribution.

The result is a commercially deadly combination of increasing expenses and declining revenues from both subscriptions and advertising. Indeed, the Disney cable networks division experienced an 11% decline in operating income for its most recent quarter, as compared to the same quarter a year ago, all of which is due to a drop at ESPN. Locked into huge, long-term licensing fees, perhaps the only material way to improve bottom line, at least in the short-term, is to cut from somewhere, and that “somewhere” are the “on-air” personalities, many of whom have been with ESPN for some time. (In 2015, ESPN had laid off some 300 employees, but most of them were “off camera” types.)

Perhaps there was a sense that the fate of “on-air” personalities would be different; after all, they were identified by the public as synonymous with ESPN cable offerings. If that was the sense, it was wrong. In the best tradition of a sanitized corporate statement, the president of ESPN, John Skipper (how ironic, with “skipper” being slang in American baseball for the on-field manager of a baseball team), wrote in a letter to ESPN employees—
“Dynamic change demands an increased focus on versatility and value, and as a result, we have been engaged in the challenging process of determining the talent—anchors, analysts, reporters, writers and those who handle the play-by-play—necessary to meet those demands.”
At the end of the day, the sporting event itself (much like “meat and potatoes” newspaper contents), is the heart of what the sports broadcasting platform ultimately has to offer. In a hyper-charged world about anxiety over employment security, sports broadcasting may ultimately be no different—Teflon can only go so far.

Photo at left by Eleassar

Photo on bottom right by Tanya Dropbear

Thursday, 27 April 2017

Filmspeler, the right of communication to the public, and unlawful streams: a landmark decision

Yesterday this blog reported that the Court of Justice of the European Union (CJEU) has issued yet another long-awaited judgment, this being the decision in Filmspeler, C-527/15.

At the time of writing, the text of the ruling was not yet available. Now that it is and having had a chance to read it, it seems to me that – despite its highly specific factual background (sale of multimedia players enabling free access to audiovisual works protected by copyright without the consent of the rightholders) - Filmspeler is a MAJOR copyright decision.

The reason is essentially two-fold:

·       First, because the Court relaxed the notion of what amounts to an ‘indispensable intervention [the judgment does not even contain a reference to the intervention being ‘indispensable’] for the sake of the right of communication to the public within Article 3(1) of the InfoSoc Directive. This means – as I also suggested in this article on GS Media written for Common Market Law Review – that a broader group of defendants might be now regarded as primarily liable for unauthorized acts of communication to the public.
·       Secondly, because the Court held that streaming unlicensed content can amount to copyright infringement, on consideration that the mandatory exemption for temporary copies within Article 5(1) of the InfoSoc Directive would not be applicable. This paves the way to holding not only those who provide unlawful streams, but also viewers of such streams, liable for copyright infringement.

Let’s take a closer look at both issues.

the right of communication to the public:
yes, but where to start,
wonders Bubi?
Construction of the right of communication to the public

The first issue for the Court to address was whether the concept of ‘communication to the public’ must be interpreted as covering the sale of a multimedia player on which there are pre-installed add-ons, available on the internet, containing hyperlinks to websites - that are freely accessible to the public - on which copyright-protected works have been made available to the public without the consent of the rightholders.

As usual, the CJEU recalled at the outset that the right of communication to the public, which is preventive in nature, must be interpreted broadly. This is so in order to fulfill one of the objectives of the InfoSoc Directive, ie to grant authors a ‘high level of protection’.

Provided that an act of communication to the public requires (1) an act of communication directed (2) to a public, what actually amounts to an act of communication to the public also requires an individual assessment and taking into account several complementary criteria. These – as the CJEU noted in GS Media – are not autonomous and are interdependent, and must be applied both individually and in their interaction with one another.

At para 31 of the Filmspeler decision the Court recalled that among such criteria, there is “the essential role played by the user. The user makes an act of communication when he intervenes, in full knowledge of the consequences of his action, to give access to a protected work to his customers and does so, in particular, where, in the absence of that intervention, his customers would not, in principle, be able to enjoy the broadcast work”.

Readers might remember that in his Opinion in GS Media, Advocate General (AG) Wathelet [here] had embraced a narrow understanding of what amount to such an ‘essential role’/’indispensable intervention’. The AG held the view that links posted on a website that direct to copyright works freely accessible on another website cannot be classified as an ‘act of communication’: the
intervention of the operator of the website that posts the hyperlinks is not indispensable to the
making available of the works in question to users. The CJEU did not go as far as AG Wathelet. However, it ‘limited’ liability for linking to unlicensed content to the situations in which [see further here]:

·       The defendant has knowledge that the content linked to is unlicensed and no defence is available to him;
·       The defendant operates for profit, so that he is presumed to have knowledge of the lawful/unlawful character of the content linked to, and he fails to rebut such presumption;
·       The defendant's link circumvents restrictions to access.

An indispensable intervention
to allow access
Why Filmspeler is different

Filmspeler is different. Although possibly a natural evolution of GS Media and preceding case law, it seemingly broadens the framework of liability. This is essentially because the intervention needed to fall within the scope of Article 3(1) does not require to be strictly indispensable: mere facilitation seems enough.

The Court excluded that the sale of a multimedia player could be regarded as akin to the mere provision of physical facilities [this is outside the scope of Article 3(1), as Recital 27 in the preamble to the InfoSoc Directive clarifies], and concluded that the communication at hand to would be to a ‘public’.

With regard to the former, the Court noted that “intervention enabling a direct link to be established between websites broadcasting counterfeit works and purchasers of the multimedia player, without which the purchasers would find it difficult to benefit from those protected works, is quite different from the mere provision of physical facilities … [I]t is clear  … that the streaming websites at issue in the main proceedings are not readily identifiable by the public and the majority of them change frequently.” [41]

Turning to the notion of ‘public’, the court held that there is a ‘public’ if a number (above de minimis) of persons purchases or may acquire the multimedia player in succession and has an internet connection [44 and 45; so potentially this means ‘anyone’]. The CJEU also noted that in this case the works would be communication to a ‘new public’. [47]

Having established that in the case at hand there would be a communication to a new public, the CJEU turned to GS Media, and noted that: (1) the defendant has knowledge that the content linked to is unlawful [50]; (2) the defendant has a profit-making intention.

Readers will remember that in GS Media the CJEU failed to provide guidance on how the profit-making intention criterion should be assessed: should one consider whether the relevant link is provided with the intention to make a profit? Or should rather one consider the surrounding environment to the relevant link, eg whether it is provided on a website that is operated for profit?

Although both alternatives appear plausible, consideration of the context in which the relevant link is provided appears to be more in line with earlier CJEU case law and, now, Filmspeler

In both SGAE and FAPL, in fact, the Court considered that the profit-making nature of the communication was apparent from the fact that the defendants transmitted the relevant works in their own establishment (hotels and a public house, respectively) in order to benefit therefrom and to attract customers to whom the works transmitted are of interest. 

Similarly, in Filmspeler the profit-making intention subsists because “the multimedia player is supplied with a view to making a profit, the price for the multimedia player being paid in particular to obtain direct access to protected works available on streaming websites without the consent of the copyright holders … [T]he main attraction of such a multimedia player for potential purchasers lies precisely in the fact that add-ons are pre-installed on it which enable users to gain access to sites on which copyright-protected films are made available without the consent of the copyright holders.” [51]

Also known as 'three-step test'
Streaming of unlicensed content

The next, topical, issue to address was whether the streaming of unlicensed content could result in liability infringement of the right of reproduction or could be, instead, excused under the exemption for temporary copies within Article 5(1) of the InfoSoc Directive.

As readers know, the exemption within Article 5(1) is subject to five cumulative conditions that must be interpreted strictly: (1) the act of reproduction is temporary; (2) it is transient or incidental; (3)  it is an integral and essential part of a technological process; (4) the sole purpose of that process is to enable a transmission in a network between third parties by an intermediary or a lawful use of a work or protected subject matter; and (5) that act does not have any independent economic significance.

In addition, Article 5(1) is subject to the three-step test in Article 5(5).

The CJEU held that the acts of reproduction at issue do not relate to a lawful use of copyright works, also because the main attraction of Filmspeler’s player is the pre-installation of the add-ons. In addition, and as a consequence, the resulting temporary acts of reproduction are such as to adversely affect the normal exploitation of those works and causes unreasonable prejudice to the legitimate interests of the right holder [71].


As mentioned, the background proceedings in Filmspeler relate to a very specific factual background, so I expected that the resulting CJEU decision could have limited impact.

This does not seem to be the case.

Watch out what you're watching!
Communication to the public

As regards the construction of communication to the public, two main aspects are worth noting.

First, that facilitation is seemingly akin to intervention, which arguably does not even need to be ‘indispensable’. This makes me think when the CJEU decides Ziggo, it will follow AG Szpunar [here] and hold that a subject like The Pirate Bay makes acts of communication to the public, and is primarily liable for copyright infringement.

In the immediate aftermath of the AG Opinion in Ziggo and the CJEU decision in Filmspeler some commentators have submitted that the CJEU has de facto harmonised secondary liability, ie an area of copyright that has not been formally harmonized at the EU level. That might be true, but it is important to note that not all EU Member States envisage a secondary liability regime for copyright infringement.

The second aspect is that after Filmspeler it should be clear that one’s own profit-making intention should be appreciated in relation to the context, ie surrounding environment, in which the allegedly infringing act takes place, rather than whether the actual act of infringement is motivated by a profit-making intention. This, as seen from the early national applications of GS Media (particularly in Sweden and Germany), should broaden the situations of prima facie infringement.

Unlawful streaming

Turning to liability for unlawful streaming, just a few weeks ago the Derbyshire Council Trading Standards in the UK submitted that streaming unlicensed content would not give rise to liability. After Filmspeler, this does no longer seem true.

Although there might be a discussion as to whether the acts of reproduction are actually made by the viewer (rather than the site that hosts the stream), it appears that now the case of unlawful streams is fully comparable to that of unlawful downloads. In fact, the reasoning of the CJEU in Filmspeler closely resembles that in ACI Adam [Katposts here], ie the case concerning whether unlawful downloads of copyright works could be covered by the private copying exception.

In conclusion

All in all, Filmspeler is a very good victory for rightholders: this is so as far as their enforcement efforts are concerned, but also in relation to lobbying work at various levels – notably the EU and the drafting of a ‘value gap’ provision.

Wednesday, 26 April 2017

Happy World IP Day!

The AmeriKat is currently writing this post at 37,000 feet somewhere off the east coast of the US. As eye-rolling as this may sound, she loves these moments where she can look towards the horizon and ponder on the various things going on in her life. However, she has been finding it more difficult to ponder and to plan given the turbulent times in which we live and the impact on our IP field.

Political discourse across the world is being exchanged at a fevered pace and in fevered tones.  Uncertainty as to the direction and destination of some of the world's biggest consumer markets permeates news headlines.  In the midst of this flux, what role does IP have?  Well,in the vein of Brad Smith's (General Counsel, Microsoft), comments during Fordham last week, IP will have an important role to play and one that it has been accustomed in playing through centuries of technological upheaval, political change and troubling periods of history.  

The way in which nations, innovators and the public have engaged with IP during these times have been diverse and context specific.  Some countries in their infancy, like the US, chose not to engage with IP at all (or at least minimally).  Other countries through various periods have adopted different approaches on substantive IP and trade issues.  There has been a continuum of different national approaches towards IP and, belatedly, some international harmonization.  

But, perhaps, in these polarized and divisive times there may be a new role of IP.  That as a unifying force. IP has common goals of incentivzing innovation and creation for the benefit of society.   IP also touches on everything.  It is the life blood of companies and individuals who rely on protection to get their products and works to the public.  It employs people.  It nourishes people.  It challenges people. 

So on this IP day perhaps we should think a bit about what unites us in our profession, despite all the challenges (and opportunities) that lay head politically and how we can provide strong united leadership in IP, policy and innovation over the coming year for the benefit of all.  

And with that rosy, high-altitude perspective relayed.... 

Happy World IP Day from the entire IPKat team!

(And happy birthday Sir Robin Jacob!)

Varsity Brands and Star Atheltica - A Closer Look

Varsity Brands' registered copyright works
In March the IPKat reported the breaking news that the long awaited US Supreme Court decision in Star Athletica v Varsity Brands had finally come out.

Now, in the words, of Seth Meyers, it's time for A Closer Look.

The Supreme Court decision is not about whether the cheerleader uniforms in issue met the requisite level of creativity to qualify for protection as copyright works (although both majority opinions did note that the level of creativity required is "extremely low" following Feist).

Instead, this case was concerned with art as it is applied to functional (or "useful") items be that a cheerleader's outfit, a lamp or anything in between.  More specifically it was about the circumstances in which it is possible to separate the artistic work from the functional item and the method for doing so.

Some applied art
(at Tate Britain until 29 May 2017)
Why is this an issue?

§101 of the US Copyright Act defines “Pictorial, graphic, and sculptural works” as including:
two-dimensional and three-dimensional works of fine, graphic, and applied art...  the design of a useful article, as defined in this section, shall be considered a pictorial, graphic, or sculptural work only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article (emphasis added).
Star Atheltica argued that the five designs in issue served the useful function of identifying the garments as cheerleading uniforms and therefore they could not be physically or conceptually separated from the cheerleading uniforms.

Is it necessary to consider separation at all?

Varsity Brands' primary argument was that the copyright works in issue are two dimensional graphic designs which appear on useful articles but are not themselves designs of useful articles.  The above images depict the registered copyright works.  They were all created before the cheerleading uniforms rather than taken from the uniforms after creation.  Therefore, they said, it is not necessary to consider whether the artistic work can be separated from or exist independently of the cheerleading uniform because the designs in issue are not for a useful article.

The Supreme Court disagreed. Because the designs were incorporated into the design of a useful article and §101 explicitly provides for two dimensional items being part of a useful article, this must be the sort of issue that congress had in mind when drafting the section.  Therefore, the majority held that the separability analysis applies in this instance.

Ginsburg J disagreed with this analysis and noted that because the designs were created before they were applied, "the designs are themselves copyrightable pictorial or graphic works reproduced on useful articles" (emphasis in original).  Therefore, in her view, the separability analysis is not necessary at all.

What is the separability test?

The separability test consists of two requirements (as set out in the statute):
  1. separate identification - this was considered to be "not onerous" as anyone can look at a useful article and identify some 2D or 3D component which has PGS qualities (i.e. pictorial, graphic or sculptural qualities);
  2. independent existence - is usually "more difficult to satisfy".  This requires that the PGS work must be able to exist alone once it is separated from the useful article. 
One of the statuettes from Mazer
The key authority in this decision was able to shed some light on this issue.  Mazer v Stein, 347 US 201, 214 (1954) concerns the protection of lamps.  More specifically it answered the question as to whether a statuette which was intended for use as a lamp base could be protected by copyright.

Mazer held that: (i) copyright subsisted in the statuette even though it was intended for use as a lamp base; and (ii) it was irrelevant whether the statuette was initially created as a freestanding sculpture or as a lamp base.

Therefore, Mazer said that "if a design would have been copyrightable as a standalone pictorial, graphic or sculptural work, it is copyrightable if created first as part of a useful article".   The Supreme Court traced the origins of §101 to Mazer and consequently intepreted §101 in line with Mazer.

They summarised the test as:
"[A] feature of the design of a useful article is eligible for copyright if, when identified and imagined apart from the useful article, it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium."
When applying this test to the cheerleading uniforms in issue they found that:
  1. the surface decorations on the uniforms could be identified as features having pictorial, graphic or sculptural qualities;
  2. the arrangement of colours and chevrons etc could be separated from the uniform and applied to another medium e.g. a painting;
  3. removing the surface decorations from the uniforms would not replicate the uniforms themselves.
If the decoration is removed, what is left?
Why was the Supreme Court divided?

This was not a unanimous decision.  The court was split 6-2 with Breyer J and Kennedy J dissenting.  

The court's opinion was divided on the following key issues.


The dissent argued that removing the designs from the cheerleading uniforms and placing them in some other medium, e.g. a canvas, would create "pictures of cheerleader uniforms".  In other words, even when the surface decoration is extracted, you cannot entirely remove the useful article (the uniform).  

The majority noted that two-dimensional applied art inevitably correlates to the medium on which it is recorded and it would be ludicrous for a fresco, ceiling panel or dome to lose copyright protection simply because they are designed to track the dimensions of the surface on which is is painted. 

Moving from fine art to a more popular realm, the justices applied the same reasoning to painted guitars being replicated on album covers.  They noted that it would create an anomaly if they (a) deny copyright protection to art that was first applied to a useful object whilst (b) allowing art which was later applied to a useful object to be protected.

The dissent allowed that a work of art printed on a T-shirt could be protected.  The majority noted that there is no material difference between a T-shirt and the uniforms.  They were clear that this decision does not give anyone the right to prevent the manufacture of cheerleading uniforms of the same shape, cut or dimensions.

Physical vs conceptual separability - usefulness after removal

One of the arguments around separability focused on whether it was necessary for the original item to remain as useful after the artistic work is removed.  In this instance, the dissent considered that the designs were necessary to identify the wearer as a cheerleader.  If the surface decoration it would simply be a plain white outfit rather than a cheerleading uniform.  

The majority gave this argument short shrift.  They noted that it you took the lamp in Mazer and removed the statuette you would be left with a shade, bulb and wires - i.e. it would not be equally useful after removal.  Importantly, "the statute does not require that we imagine a nonartistic replacement for the removed feature to determine whether that feature is capable of independent existence" (emphasis in original).

As a result of their analysis, the court "necessarily abandon[ed] the distinction between 'physical' and 'conceptual' separability which some courts and commentators have adopted".  The justices were very clear that because the statute does not require the underlying useful article to remain, the physical-conceptual distinction is unnecessary.  The only relevant question for separability is: can the artistic work be conceptually separated from the useful article?

Artistic judgment and marketability

There was an argument that the test for identifying an artistic work should include two objective components:

(1) do the design elements reflect the designer's artistic judgment?
(2) would the artistic feature be marketable to a significant segment of the community without its utilitarian function?

As neither test has any basis in the US Copyright Act, both tests were rejected.  Adding market surveys into the copyright process did not sound like a good idea to the justices as it "threatens to prize popular art over other forms or to substitute judicial aesthetic preferences for the policy choices embodied in the Copyright Act".

Inconsistent with the exclusion of industrial design

There has been a long history of the fashion industry trying to get protection for clothing as a specific useful article (in a similar way that semiconductor chips and boat hulls have been protected).

Because congress has declined to specifically protect clothing as copyright (and left it to be covered by design patents), Star Athletica argued that there was a "presumption against copyrightability".

The majority noted that (i) "congressional inaction lacks persuasive significance", (ii) design patents and copyright are not mutually exclusive; and (iii) the test formulated by the Supreme Court would not protect the physical garments including their shape, cut and dimensions but only the surface decoration applied to those uniforms. 

Although the ultimate decision on infringement could still go in Star Athletica's favour, the basic principle from this decision (i.e. that art can be protected as a copyright work if it can be conceptually separated from a utilitarian object) seems perfectly reasonable to me.  Whether this will make a tremendous change to industry remains to be seen.   

For more on the history of the Mazer v Stein statuettes including more images of the statuettes at issue in the case and an explanation for any ballet dancer/Balinese dancer confusion see Zvi Rosen's fascinating blog here.

Finally - a big caveat and a shout out to all the US copyright lawyers.  I am an English lawyer and whilst many of the principles in this judgment are similar, if there are any errors or omissions, whether in use of language or interpretation of the decision, please let me know and I can update the post.

By Rosie Burbidge

BREAKING: CJEU in Filmspeler rules that the sale of a multimedia player is a ‘communication to the public’

Did you think that the story with copyright, linking, and the right of communication to the public was over? 

Of course not.

Today the Court of Justice of the European Union (CJEU) issued its long-awaited [even more keenly awaited is however the forthcoming ruling in Ziggo, aka The Pirate Bay case, heredecision in Filmpeler, C-527/15.


As readers will remember, this reference for a preliminary ruling had arisen in the context of litigation between Dutch anti-piracy organization Stichting Brein and Jack Frederik Wullems over the sale, by the latter and through - among other things - his site, of various models of a multimedia player under the name ‘filmspeler’. 

Filmspeler is a player for connecting a source of image and/or sound signals to a television screen. If the multimedia player is connected to the internet, on the one hand, and to a user’s screen (for example, a television screen), on the other, the user is able to stream the image and the sound from a web portal or website.

Among other things, Wullems installed add-ons [over which he had no influence] containing hyperlinks which, if clicked, would redirect the user to streaming websites, controlled by third parties, on which films, television series and (live) sporting events could be enjoyed free of charge, with or without the authorisation of relevant rightholders. 

Stichting Brein sued Wullems for copyright infringement before the District Court of Central Netherlands, claiming that through the sale of the Filmspeler player, Wullems was carrying out a ‘communication to the public’ contrary to Dutch copyright law.

The District Court held the view that the relevant Dutch provisions should be interpreted in light of Article 3 of the InfoSoc Directive but considered that: 

(1) CJEU case law existing at that time [notably Svensson and BestWaterwould not provide criteria sufficient for reaching a decision in this case; and 
(2) it was unclear whether the defence for temporary copies, pursuant to the Dutch transposition of Article 5(1) of the InfoSoc Directive, would be applicable to relevant streaming activities.

The District Court decided therefore to stay the proceedings and seek guidance from the CJEU as to the following:

‘1)      Must Article 3(1) of the [InfoSoc] Directive be interpreted as meaning that there is “a communication to the public” within the meaning of that provision, when someone sells a product (mediaplayer) in which he has installed add-ons containing hyperlinks to websites on which copyright-protected works, such as films, series and live broadcasts are made directly accessible, without the authorisation of the right holders?
2)      Does it make any difference:
-      whether the copyright-protected works as a whole have not previously been published on the internet or have been published only through subscriptions with the authorisation of the right holder?
-      whether the add-ons containing hyperlinks to websites on which copyright-protected works are made directly accessible without the authorisation of the right holders are freely available and can also be installed in the mediaplayer by the users themselves?
-      whether the websites and thus the copyright-protected works made accessible thereon — without the authorisation of the right holders — can also be accessed by the public without the mediaplayer?
3)      Should Article 5 of the [InfoSoc] Directive (Directive 2001/29/EC) be interpreted as meaning that there is no “lawful use” within the meaning of Article 5(1)(b) of that Directive if a temporary reproduction is made by an end user during the streaming of a copyright-protected work from a third-party website where that copyright-protected work is offered without the authorisation of the right holder(s)?
4)      If the answer to the third question is in the negative, is the making of a temporary reproduction by an end user during the streaming of a copyright-protected work from a website where that copyright-protected work is offered without the authorisation of the right holder(s) then contrary to the “three-step test” referred to in Article 5(5) of the [InfoSoc] Directive (Directive 2001/29/EC)?’

Today's decision

At a first glance it would appear that the CJEU substantially followed the Opinion of Advocate General (AG) Manuel Campos Sánchez-Bordona [here], who proposed a broad(er) interpretation of the right of communication to the public and, with it, a broader reading of what amounts to an 'indispensable intervention'.

The CJEU decision is not yet available on the Curia website, but according to the press release:

"In its judgment today, the Court of Justice holds that the sale of a multimedia player, such as the one in question, is a ‘communication to the public’, within the meaning of the directive. 

The Court recalls, in that regard [and unsurprisingly], its case-law according to which the aim of the directive is to establish a high level of protection for authors. The concept of ‘communication to the public’ must therefore be interpreted broadly. In addition, the Court has already held that the availability, on a website, of clickable links to protected works published without any access restrictions on another website offers users of the first website direct access to those works. That is also the case in respect of a sale of the multimedia player in question. 

In the same way, Mr Wullems, in full knowledge of the consequences of his conduct, preinstalls, on the multimedia player add-ons that make it possible to have access to protected works and to watch those works on a television screen. Such actions are not to be confused with the mere provision of physical facilities, referred to in the directive. In that regard, it is clear from the observations submitted to the Court that streaming websites are not readily identifiable by the public and the majority of them change frequently. 

The Court also observes that, according to the referring court, the multimedia player has been purchased by a fairly large number of people. Furthermore, the communication at issue covers all persons who could potentially acquire that media player and have an internet connection. Thus, that communication is aimed at an indeterminate number of potential recipients and involves a large number of persons. In addition, the provision of the multimedia player is made with a view to making a profit [clearly consideration of the defendant's profit-making intention was due to become central, especially after GS Media], the price for the multimedia player being paid in particular to obtain direct access to protected works available on streaming websites without the consent of the copyright holders. 

The Court also finds that temporary acts of reproduction, on that multimedia player, of a copyright protected work obtained by streaming on a website belonging to a third party offering that work without the consent of the copyright holder, cannot be exempted from the right of reproduction [within Article 5(1)]

Under the directive, an act of reproduction is only exempt from the right of reproduction if it satisfies five conditions, namely (1) the act is temporary, (2) it is transient or incidental, (3) it is an integral and technical part of a technological process, (4) the sole purpose of that process is to enable a transmission in a network between third parties by an intermediary or a lawful use of a work or subject matter, and (5) that act does not have any independent economic significance. Those conditions are cumulative in the sense that non-compliance with one of them will lead to the act of reproduction not being exempted. Furthermore, the exemption is to be applied only in certain special cases which do not impair the normal exploitation of the work or other subject matter and do not unreasonably prejudice the legitimate interests of the right holder. 

In the present case and having regard, in particular, to the content of the advertising of the multimedia player and to the fact that the main attraction of that player for potential purchasers is the pre-installation of the add-ons concerned, the Court finds that the purchaser of such a player accesses a free and unauthorised offer of protected works deliberately and in full knowledge of the circumstances. 

Furthermore, acts of temporary reproduction, on the multimedia player in question, of copyright-protected works adversely affects the normal exploitation of those works and causes unreasonable prejudice to the legitimate interests of the copyright holders because it usually results in a diminution of the lawful transactions relating to those protected works."

*Who* makes
acts of communication to the public?
Flash comment

A more detailed analysis will be provided as soon as the judgment becomes available. 

In the meantime, I can just say that this judgment is good news for rightholders, including those who are advocating the introduction of the 'value gap' provision in Article 13 of the draft directive on copyright in the Digital Single Market. The reason is that with this decision the CJEU appears to have relaxed the notion of 'indispensable intervention' and potentially paved the way to a broadening of the types of subjects that might be regarded as primarily responsible for acts of communication to the public.

In this article I wrote on GS Media I suggested in fact that, should the CJEU follows the AGs in both Filmspeler and Ziggo, the consequence indicated above might naturally follow.

In this sense, the concept of ‘communication to the public’ has been undergoing an evolution and the frontier Filmspeler and Ziggo represent is that of determining not just what amounts to an act of communication to the public, but also who makes an act of communication to the public. 

Stay tuned for a more detailed analysis! 

[UPDATE at 11:45 am: the text of the judgment is now available here]

Fordham 25 (Report 9): FRAND, SEPs & PAE's

Following on from the Pharma, IP and Competition panel, we stick with competition law issues, but change focus to the tech industry for a session on the latest developments in the perennially controversial area (or as discussed below, perhaps now less so) of SEPs and, later, NPEs.  Laura Whiting reports on the sessions:  
"FRAND/Standard Essential Patents 
This is not FRAND (it is a frond)
The panel was again introduced by Prof Daryl Lim and Nicholas Banasevic started by saying that he was pleased that there was now general consensus that there was a role for competition to play in relation to injunctions based on SEPs where there was a FRAND declaration.  Milan Kristof followed up on this by saying that although the CJEU's Huawei/ZTE decision has been criticised for not providing enough guidance on what is required in order from parties to SEP negotiations, in fact he felt that the CJEU had provided as much guidance as could reasonably be expected from a tribunal of its nature.  He commented that the roll-out of 5G and IoT could only lead to further litigation and that to address this the Commission is working on a policy paper which is aimed at plugging (some of) the gaps in the Huawei decision. 
Dina Kallay agreed that there had been a lot of progress in relation to FRAND commitments but did not feel there had been as much convergence between the varying viewpoints as might have been anticipated.  However, she felt the increased level of guidance from the courts was welcomed by industry.    David Por also thought the suggestion of convergence was optimistic.  There was still divergence in European national courts' application of the Huawei process which ranged from a "box-ticking" or "ping pong" approach all the way to the (UK style) detailed and careful analysis of the patents and licences in question.  In addition, he feels there is still insufficient guidance on the valuation of royalties from the courts.

Dirk Weiler
On the topic of setting suitable royalty rates, Dirk Weiler commented that the aggregate royalty rates for smartphones had not changed significantly from the high single digit rates (based on unit price) proposed by several companies for LTE in the mid-2000s.  He said that the big patent holders were interested in fostering the market rather than destroying it and that required a dialogue between patent holders and implementers, especially in the IoT sphere.  He does not think that the solution is government regulation but accepted that it might come to that if the market players could not agree suitable rates between themselves.  David commented that if the early LTE royalties offered by various companies were aggregated, they exceeded the total level of aggregate royalties per product that most companies considered reasonable.  That suggested that a solution may not be achievable by companies acting alone, and intervention may be required.  Timothy Syrett emphasised that in setting rates, he felt it hugely important that a licensor explains the merits of the patents in its portfolio and further justifies the level of its licence demand, potentially by reference to aggregate royalty rates.
Sir Robin Jacob commented from the audience that the UK Unwired Planet decision that a FRAND declaration amounts to an enforceable contract was, in his view, a game changer since it meant that the courts can now deal with the question of the appropriate royalty rate without further regulatory intervention.  Nicholas commented that the Commission still considered there was a role for competition law in setting rates, but agreed that now the principles had been established, national courts could implement them and the Commission was happy for them to do so - this was a positive development.
Dirk returned to the topic of transparency and said the ETSI IPR Committee were now focusing on increasing transparency as regards patent holdings.  In his view, the ETSI requirements for patent holders were very specific; however disclosure requirements varied between organisations in the industry and ETSI was therefore working to enhance its own declaration requirements and to make the declarations database more transparent.

Dina mentioned that industry was working on a "one stop shop" patent pool for cellular patents for 5G IoT devices which she hoped would be successful.  Dirk commented that there was ongoing discussions relating to 5G between the automotive/wireless industry; he repeated that in his view it was preferable for the industries to agree amongst themselves than for solutions to be imposed externally.
Fred faces off with the UP judgment
The panel turned next to an analysis of the UK Unwired Planet judgement (with Mr Justice Birss pricking up his ears in the audience).  Nicholas said that it was a fair application of Huawei/ZTE and while the Commission would have liked to have seen an analysis of the value of the technology ex ante as well as ex post, the decision reflected the principles that the Commission believes should be applied.  Milan commented that it was interesting to see the first European judgment which considered FRAND in detail – and that he would have welcomed even more discussion on the interaction between competition and contract law.  He noted that the General Court had held in Microsoft that FRAND could be a range as well as a single number and speculated that this could perhaps be considered in future cases.  
Dina Kallay
Dina welcomed the assessment of royalties on a global basis.  She thought the basis of the assessment was broadly consistent with Google v MMI in the US.  David noted that the judgment was very pragmatic and accepted that setting a FRAND rate will always involve a degree of approximation.  He responded to Nicholas's comment on FRAND ranges by saying that ranges were inherently difficult to set  Tim raised concerns about setting a worldwide licence without engaging in an analysis of where portfolio patents are (or are not) in force or valid: he felt that this placed the onus on the licensee to take a licence whether or not all the patents were valid.  He also noted that whilst royalty rates had been addressed in detail, he would also have liked to see further discussion of the appropriate royalty base to which those rates should be applied.
Jane Mutimear asked the panel whether any further regulatory involvement was really necessary (whether in traditional wireless industries or others) in light of the recent cases.  Nicholas agreed that prescriptive regulatory guidance was not needed but thought that, given the likelihood for IoT participants to be relatively inexperienced, some level of clarification could be merited to facilitate implementation of the principles already set out.  David suggested that although the initial cases in this area would inevitably be heavy with legal arguments, subsequent cases should be streamlined once an initial body of jurisprudence has been developed.

Patent Assertion Entities
After an introduction by John Richards, Nikolaus Thumm presented on a recent report on PAEs in Europe.  He introduced the history of activity by PAEs in the telecoms sector and noted that increasing interoperability is likely to see increased PAE activity in the automotive and white goods sectors, but that the report had found no evidence of assertions against European SMEs.
Whilst some commentators have suggested that the introduction of the UPC will lead to increased assertions by PAEs, Nikolaus suggested that the structure of the system contained some specific features which would prevent this. 

Suzanne Munck followed up by commenting on the results of an FTC report on PAEs and said that the FTC had worked together with the JRC on policy in this area.  The FTC report defined PAEs as entities which have acquired their patent portfolios and do not work them (as opposed to NPEs, which file their own patents).  The study covered 22 PAEs and >300 asserting affiliates over a 5 year period and the FTC had observed two main business models, described as litigation PAEs and portfolio PAEs.  The FTC found that the separation between the two was clearly defined, with litigation PAEs obtaining 93% of their licences after bringing proceedings.  The portfolio PAEs typically negotiated licences without resorting to litigation (albeit they did sometime litigate, and negotiated under the shadow of litigation) and generally held larger portfolios.  The study looked at >37,000 patents, of which 75% had software related claims and therefore the study concluded that the majority of these issues were focused on the tech sector.
Scott W Burt suggested that the majority of so-called "troll problems" originated from litigation PAEs rather than portfolio PAEs, which in his view behaved like the licensing arm of manufacturing companies.  In response to a question about how much Conversant invested in R&D, Scott commented that its current R&D spend is zero – with its patent portfolio being a combination of patents developed in house with those bought in.   
Myles Jelf
Approaching matters from a more philosophical point of view, Myles Jelf started from the contention that patents reflect a valuable item of property awarded to the patentee in return for their disclosure of the patented invention to the public.  In his view, any change in the rules regarding injunctions or assertions in order to disfavour one or other category of patentees based on their business model was not merited – he noted that this could potentially have unintended consequences (for example harming universities or lone inventors who may not be able to afford to commercialise their own invention).  However, there was possibly a case for special treatment based on the scenario in which a patent is asserted.  For example, the FRAND rules for SEPs are designed to compensate for the distorted value of patents included in standards so that those patents do not acquire a value disproportionate to their technological contribution. 
Steven Lieberman suggested that the boundary between litigation and portfolio PAEs was graduated.  He saw an increasing trend in the US courts for conscientious judges to speed up early case resolution (for example by granting summary motions), which was itself driving a trend for earlier settlement.  He also commented on the value of the IPR procedure for swiftly resolving patent assertions where the strength of the asserted patent is low."

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