IP case law Court of Justice

Judgment of 22 Sep 1998, C-61/97 (Laserdisken)



JUDGMENT OF THE COURT

22 September 1998 (1)

(Copyright and related rights — Videodisc rental)

In Case C-61/97,

REFERENCE to the Court under Article 177 of the EC Treaty by Retten i Ålborg(Denmark) for a preliminary ruling in the proceedings pending before that courtbetween

Foreningen af danske Videogramdistributører, acting for

Egmont Film A/S,

Buena Vista Home Entertainment,

Scanbox Danmark,

Metronome Video,

Polygram Records,

Nordisk Film Video,

Irish Video,

Warner Home Video,

and

Laserdisken, in the person of Hans Kristian Pedersen,

supported by:

Sammenslutningen af Danske Filminstruktører,

Michael Viuf Christiansen,

Pioneer Electronics Denmark A/S,

Videoforhandler Ove Jensen,

on the interpretation of Articles 30, 36, 85 and 86 of the EC Treaty and of CouncilDirective 92/100/EEC of 19 November 1992 on rental right and lending right andon certain rights related to copyright in the field of intellectual property (OJ 1992L 346, p. 61),

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, C. Gulmann, M. Wathelet andR. Schintgen (Presidents of Chambers), G.F. Mancini, J.C. Moitinho de Almeida,J.L. Murray, J.-P. Puissochet (Rapporteur), G. Hirsch, L. Sevón and K.M. Ioannou,Judges,

Advocate General: A. La Pergola ,


Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

—    Foreningen af danske Videogramdistributører, acting for Egmont Film A/Sand Others, by Johan Schlüter, of the Copenhagen Bar,

—    Warner Home Video Inc., by Stephen Kon, Solicitor in the firm ofS.J. Berwin & Co., and Strange Beck, of the Copenhagen Bar,

—    Laserdisken, in the person of Hans Kristian Pedersen, by its owner, HansKristian Pedersen,

—    Sammenslutningen af Danske Filminstruktører and Michael ViufChristiansen, by Anders Hjulmand, of the Ålborg Bar,

—    Pioneer Electronics Denmark A/S, by Leif Hansen, 'administrerendedirektør‘,

—    Videoforhandler Ove Jensen, by Per Mogensen, of the Åbybro Bar,

—    the Danish Government, by Jørgen Molde, Head of Department in theMinistry of Foreign Affairs, acting as Agent,

—    the French Government, by Kareen Rispal-Bellanger, Assistant Director inthe Legal Affairs Directorate of the Ministry of Foreign Affairs, andPhilippe Martinet, Secretary of Foreign Affairs in the same Directorate,acting as Agents,

—    the Finnish Government, by Holger Rotkirch, Head of Legal Affairs at theMinistry of Foreign Affairs, acting as Agent,

—    the United Kingdom Government, by Lindsey Nicoll, of the TreasurySolicitor's Department, acting as Agent, and Daniel Alexander, Barrister,

—    the Commission of the European Communities, by Berend Jan Drijber andHans Støvlbæk, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Foreningen af danskeVideogramdistributører, acting for Egmont Film A/S and Others, Warner HomeVideo Inc., Laserdisken in the person of Hans Kristian Pedersen, the DanishGovernment and the Commission of the European Communities at the hearing on31 March 1998,

after hearing the Opinion of the Advocate General at the sitting on 26 May 1998,

gives the following

Judgment

1.     By order of 7 February 1997, received at the Court on 12 February 1997, Retteni Ålborg (Court of First Instance, Ålborg) referred to the Court for a preliminaryruling under Article 177 of the EC Treaty two questions on the interpretation ofArticles 30, 36, 85 and 86 of the EC Treaty and of Council Directive 92/100/EECof 19 November 1992 on rental right and lending right and on certain rights relatedto copyright in the field of intellectual property (OJ 1992 L 346, p. 61, 'theDirective‘).

2.     Those questions were raised in proceedings between Foreningen af danskeVideogramdistributører (Association of Danish Video Distributors, 'the FDV‘),acting for Egmont Film A/S and Others, and the Danish undertaking Laserdisken,

which specialises in marketing films on laser discs ('videodiscs‘), concerning theoffer of such products imported from the United Kingdom for rental in Denmark.

3.     Under Danish law the offer of films for rental is conditional on the consent of thecopyright holder (Paragraph 23(3) of the Law on Copyright, as supplemented in1989). A similar provision was introduced into the laws of England and Wales witheffect from 1 August 1989 (the Copyright, Designs and Patents Act 1988, sections16 to 18).

4.     Article 1(1) of the Directive requires the Member States to provide a right toauthorise or prohibit the rental and lending of originals and copies of copyrightworks and other subject-matter. In accordance with Article 1(4), the rights soreferred to are not exhausted by any sale or other act of distribution. Furthermore,Article 9 of the Directive provides that, without prejudice to the specific provisionsconcerning rental and lending right, and in particular to Article 1(4), distributionright, which is an exclusive right to make available to the public by sale orotherwise one of the objects referred to, is not to be exhausted except where thefirst sale in the Community of that object is made by the rightholder or with hisconsent.

5.     Laserdisken, which has since 1985 been selling videodiscs imported from the UnitedKingdom in Denmark, began to offer those films for rental from 1987 as a measureintended to promote the sales of those products, which are significantly moreexpensive than films on videocassette and which are bought mainly by customerswho are already familiar with the work. It is apparent from the order for referencethat although the copyright holders had implicitly accepted those videodiscs beingoffered for rental in the United Kingdom, they had not authorised their beingoffered for rental outside that Member State.

6.     In 1992 an action was brought against Laserdisken for unlawful rental contrary toParagraph 23(3) of the Law on Copyright and an injunction was issued prohibitingthe defendant, subject to FDV's providing security for any damage which might becaused by the injunction, from renting out films in which the manufacturing anddistribution rights in Denmark belonged to members of the association. Theinjunction was issued by the Fogedret (Bailiff's Court, with jurisdiction to giveinterlocutory judgments in this matter) and upheld by the Vestre Landsret(Western Regional Court).

7.     Retten i Ålborg, considering that the outcome of the dispute in the proceedingsjustifying the injunction depended on interpretation of Community law, decided torefer questions to the Court for a preliminary ruling, a decision confirmed onappeal by the Vestre Landsret which, however, slightly altered the wording of thosequestions. In the final version, those questions are worded as follows:

'Do Article 30, in conjunction with Article 36, or Articles 85 to 86, of the ECTreaty preclude a person to whom the holder of the exclusive rights to a film has

transferred an exclusive manufacturing and distribution right in respect of copiesof the film in one Member State from giving consent to the rental of his ownreleases while at the same time preventing the rental of imported releases whichhave been placed on the market in another Member State, where the holder ofexclusive manufacturing and distribution rights in copies of the film has transferredownership of copies with tacit acceptance that the copies will be rented out in thatlatter Member State?

In view of the fact that Council Directive 92/100/EEC of 19 November 1992 onrental right and lending right and on certain rights relating to copyright in the fieldof intellectual property has entered into force, the same question is repeated on thebasis that the directive is applicable to the reply.‘

8.     By those two questions, the national court is asking the Court of Justice whetherit is contrary to the articles of the Treaty referred to or to the Directive for theholder of an exclusive rental right to prohibit copies of a film from being offeredfor rental in a Member State even where offering those copies for rental has beenauthorised within another Member State.

9.     It should be noted at the outset that, while the order for reference includes Articles85 and 86 of the Treaty among the Community provisions interpretation of whichis requested by the national court, it gives no explanation of the reasons for whichit raised the question of the effect of those articles in connection with the mattersof fact and law in the main proceedings. In the absence of such information thenational court, as the Advocate General pointed out at point 17 of his Opinion, hasfailed to put the Court in a position to give an interpretation of those articles whichcould be of use to it.

10.     In those circumstances, according to settled case-law whose requirements are ofparticular importance in the area of competition, which is characterised by complexfactual and legal situations (see, inter alia, the judgment in Joined Cases C-320/90,C-321/90 and C-322/90 Telemarsicabruzzo and Others [1993] ECR I-393, paragraphs6 and 7, and the order in Case C-157/92 Pretore di Genova v Banchero [1993] ECRI-1085, paragraphs 4 and 5), the questions referred by the national court must beregarded as inadmissible in so far as they concern the interpretation of Articles 85and 86 of the Treaty. As a result, those questions can be considered only withregard to the interpretation of Articles 30 and 36 of the Treaty and the Directive.

11.     In this regard, FDV, Warner Home Video Inc., the Danish, French, Finnish andUnited Kingdom Governments and the Commission propose that the Court shouldanswer the national court's questions in the negative. Their argument is, essentially,that it follows from the Court's case-law (Case 158/86 Warner Brothers and Anotherv Christiansen [1988] ECR 2605) and the Directive that the right to authorise orprohibit the rental of a film is comparable to the right of public performance and,

unlike the right of distribution, is not exhausted as soon as it has first beenexercised.

12.     On the other hand, Laserdisken and the parties intervening in its support in themain proceedings consider that the result of giving consent for rental is exhaustionof the exclusive right to prohibit copies of a film from being rented and that theexercise of such a right in the circumstances described is incompatible with Articles30 and 36 of the Treaty and with the Directive's particular objective of introducingan area without internal frontiers.

13.     As the Court pointed out in paragraph 14 of its judgment in Case C-200/96Metronome Musik v Music Point Hokamp [1998] ECR I-1953, the principle ofexhaustion of distribution rights where copyright works are offered for sale by therightholder or with his consent is expressed in the settled case-law according towhich, whilst Article 36 of the EC Treaty allows derogations from the fundamentalprinciple of the free movement of goods on grounds of the protection of industrialand commercial property, such derogations are allowed only to the extent to whichthey are justified by the fact that they safeguard the rights which constitute thespecific subject-matter of that property. However, the exclusive right guaranteedby the legislation of a Member State on industrial and commercial property isexhausted when a product has been lawfully distributed on the market in anotherMember State by the actual proprietor of the right or with his consent (see inparticular Joined Cases 55/80 and 57/80 Musik-Vertrieb Membran and K-telInternational v GEMA [1981] ECR 147, paragraphs 10 and 15, and Case 58/80Dansk Supermarked v Imerco [1981] ECR 181, paragraph 11).

14.     However, as the Court also pointed out in Warner Brothers and Another vChristiansen, literary and artistic works may be the subject of commercialexploitation, whether by way of public performance or of the reproduction andmarketing of the recordings made of them. That applies, for example, to the rentalof video-cassettes, which involves a public distinct from the one for the sale ofthose products and constitutes an important potential source of revenue for makersof films.

15.     In that connection, the Court pointed out that, by authorising the collection ofroyalties only on sales to private individuals and to persons hiring out video-cassettes, it is impossible to guarantee to makers of films a remuneration whichreflects the number of occasions on which the video-cassettes are actually hired outand which secures for them a satisfactory share of the rental market. Laws whichprovide specific protection of the right to hire out video-cassettes are thereforeclearly justified on grounds of the protection of industrial and commercial propertypursuant to Article 36 of the Treaty (Warner Brothers and Another v Christiansen, cited above, paragraphs 15 and 16).

16.     In the same judgment, the Court also rejected the argument that a maker of a filmwho has offered the video-cassette of that film for sale in a Member State whose

legislation confers on him no exclusive right of hiring it out must accept theconsequences of his choice and the exhaustion of his right to restrain the hiring-outof that video-cassette in any other Member State. Where national legislationconfers on authors a specific right to hire out video-cassettes, that right would berendered worthless if its owner were not in a position to authorise the operationsfor doing so (paragraphs 17 and 18).

17.     The release into circulation of a picture and sound recording cannot therefore, bydefinition, render lawful other acts of exploitation of the protected work, such asrental, which are of a different nature from sale or any other lawful act ofdistribution. Just like the right to present a work by means of public performance(see, in that connection, Case 395/87 Ministère Public v Tournier [1989] ECR 2521,paragraphs 12 and 13), rental right remains one of the prerogatives of the authorand producer notwithstanding sale of the physical recording (Metronome Musik,paragraph 18).

18.     The same reasoning must be followed as regards the effects produced by the offerfor rental. As the Advocate General pointed out in point 15 of his Opinion, theexclusive right to hire out various copies of the work contained in a video film can,by its very nature, be exploited by repeated and potentially unlimited transactions,each of which involves the right to remuneration. The specific right to authoriseor prohibit rental would be rendered meaningless if it were held to be exhaustedas soon as the object was first offered for rental.

19.     As for the Directive, it should be noted that the facts which gave rise to the disputein the main proceedings predate its adoption. Nevertheless, since the proceedingsbefore the national court were still in progress after the Directive began to producelegal effects in the Member States concerned and as that court has specificallyquestioned the Court in that regard, the answer to its request for interpretationmust also have regard to the Directive.

20.     While the third recital in the preamble to the Directive refers, in order to justifyeliminating the differences between national laws, to the objective set out in Article8a of the Treaty, namely to introduce an area without internal frontiers, the objectof the Directive is, as the Court found in paragraph 22 of Metronome Musik, toestablish harmonised legal protection in the Community for rental and lending rightand certain rights related to copyright in the field of intellectual property. Here itdraws a distinction between the specific rental and lending right, referred to inArticle 1, and the distribution right, governed by Article 9 and defined as anexclusive right to make one of the objects in question available to the public,principally by way of sale. Whereas lending right is not exhausted by the sale orany other act of distribution of the object, distribution right, by contrast, isexhausted upon the first sale in the Community by the rightholder or with hisconsent (Metronome Musik, paragraph 19).

21.     Thus the Directive expressly precludes the possibility that lending right, unlikedistribution right, can be exhausted by any act of distribution of the object inquestion. As stated at paragraph 18 of this judgment, such exclusion is justified bythe very nature of rental right, which would be rendered worthless if it were heldto be exhausted as soon as the object was first offered for rental.

22.     Accordingly, contrary to the submissions of the defendant and interveners in themain proceedings, it follows both from the interpretation of Articles 30 and 36 ofthe Treaty, as regards the protection of copyright, and from the interpretation ofthe Directive that the exclusive right to authorise or prohibit the rental of a film isnot exhausted when it is first exercised in one of the Member States of theCommunity. The exercise of such a right in circumstances such as those describedin the order for reference is therefore not contrary to those provisions.

23.     The answer to be given to the national court must therefore be that it is notcontrary to Articles 30 and 36 of the Treaty or to the Directive for the holder ofan exclusive rental right to prohibit copies of a film from being offered for rentalin a Member State even where the offering of those copies for rental has beenauthorised in the territory of another Member State.

Costs

24.     The costs incurred by the Danish, Finnish, French and United KingdomGovernments and the Commission of the European Communities, which havesubmitted observations to the Court, are not recoverable. Since these proceedingsare, for the parties to the main proceedings, a step in the action pending before thenational court, the decision on costs is a matter for that court.

On those grounds,

THE COURT,

in answer to the questions referred to it by Retten i Ålborg by order of 7 February1997, hereby rules:

It is not contrary to Articles 30 and 36 of the Treaty or to Council Directive92/100/EEC of 19 November 1992 on rental right and lending right and on certainrights related to copyright in the field of intellectual property for the holder of anexclusive rental right to prohibit copies of a film from being offered for rental ina Member State even where the offering of those copies for rental has beenauthorised in the territory of another Member State.

Rodríguez IglesiasGulmannWathelet

SchintgenManciniMoitinho de Almeida

MurrayPuissochetHirsch

SevónIoannou

Delivered in open court in Luxembourg on 22 September 1998.

R. Grass G.C. Rodríguez Iglesias

RegistrarPresident

1: Language of the case: Danish.


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