“Appropriate” remuneration for copyright owners: an unexpected consequence of the pub football cases
Author: Tony Ballard
Copyright owners reading the judgment of the Court of Justice in FAPL v QC Leisure and Murphy v Media Protection Services can be forgiven for being startled by the Court having held that copyright owners are entitled only to reasonable remuneration for their rights. Does this foreshadow price regulation of royalties?
There are ample precedents. Monopolistic service providers who charge “excessive” prices are liable for abuse of their dominant position. Regulators have developed sophisticated models, such as long run average incremental cost in the telecoms sector, to relate prices to their economic cost where the service provider has significant market power (the equivalent of dominance in that sector). Copyright exploitation having some features of monopoly provision, it is not inconceivable that these concepts might be applied to it. Could this be its future?
What the Court in FAPL said was that the European copyright regime does not guarantee the right holders concerned the opportunity to demand the highest possible remuneration. Instead they are ensured only “appropriate remuneration for each use of the protected subject matter … In order to be appropriate, such remuneration must be reasonable in relation to the economic value of the service provided.” In support of this proposition it cites a number of case authorities. Most of them show the Court being concerned that rights owners should be remunerated appropriately in the sense that they should not be paid too little, not too much. One of them, however, Kanal 5 v STIM, supported the proposition that it would be abusive for a dominant copyright collecting society to impose a price which was excessive in relation to the economic value of the service provided. That decision was not really on all fours with the pub football cases since the collecting society’s dominance arose from circumstances other than the monopoly features inherent in copyright itself.
So the Court in FAPL was pushing at the boundaries here to some extent. But the main prop for its initiative was the Information Society Directive, which is now the main source of copyright law in Europe, and in particular recital 10 which says: “If authors or performers are to continue their creative and artistic work, they have to receive an appropriate reward for the use of their work”. We might be forgiven for having hitherto read this as meaning “not less than” an appropriate reward instead of the new reading by the Court which, in effect is “not more than” or, perhaps, to be fair, “neither more nor less than”.
Anyway,the Court held that, in calculating the appropriate remuneration for a satellite audience, it was legitimate to take into account not only the actual and potential audience (in all Member States), measured these days with a high degree of precision thanks to the use of encryption and decoder cards, but also a premium paid by the broadcaster for territorial exclusivity. What was not legitimate was any further premium element attributable to what it called “absolute” territorial exclusivity, that is to say the prohibition on distributing decoder cards outside the broadcaster’s exclusive territory. That prohibition, which plainly had the object of eliminating cross-border trade and partitioning the internal market, was incompatible with fundamental single market principles and anti-competitive. That further premium, it held, went beyond what was necessary to ensure appropriate remuneration for the right holders.
So in the short term the lesson is that territorial exclusivity is not in itself a problem unless it is absolute and a premium is charged for it. Exclusivity is absolute if it cuts off transborder services. New licensing models for exclusive territorial rights without this absolute feature will no doubt be devised to respond to this, not only in satellite broadcasting but also on the internet where geoblocking is widespread. But in the longer term, the concept of “appropriate” remuneration as a cap rather than a threshold for rights owners will be a cause of some concern.