C-55/80
ECLI:EU:C:1981:10
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- Súdny dvor Európskej únie
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JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
1. Sound recordings, even if incor- restrict the importation of sound porating protected musical works, are recordings which have been lawfully products to which the system of free marketed in another Member State by movement of goods provided for by the owner himself or with his consent. the EEC Treaty applies.
2. The expression "protection of 4. The existence of a disparity between industrial and commercial property", national laws which is capable of dis- occurring in Article 36 of the EEC torting competition between Member Treaty, includes the protection States cannot justify a Member State's conferred by copyright, especially giving legal protection to practices of when exploited commercially in the a private body which are incompatible form of licences capable of affecting with the rules concerning the free distribution in the various Member movement of goods. States of goods incorporating the protected literary or artistic work. Articles 30 and 36 of the EEC Treaty preclude the application of national 3. The proprietor of an industrial or legislation under which a copyright commercial property right protected management society empowered to by the law of a Member State cannot exercise the copyrights of composers rely on that law to prevent the im- of musical works reproduced on portation of a product which has been gramophone records or other sound lawfully marketed in another Member recordings in another Member State is State by the proprietor himself or with permitted to invoke those rights his consent. The same applies as where those sound recordings are respects copyright, commercial distributed on the national market exploitation of which raises the same after having been put into circulation issues as that of any other industrial in that other Member State by or with or commercial property right. the consent of the owners of those Accordingly neither the copyright copyrights, in order to claim the owner or his licensee, nor a copyright payment of a fee equal to the management society acting in the royalties ordinarily paid for marketing owner's or licensee's name, may rely on the national market less the lower on the exclusive exploitation right royalties paid in the Member State of conferred by copyright to prevent or manufacture.
In Joined Cases 55 and 57/80
REFERENCE to the Court under Article 177 of the EEC Treaty by the Bundesgerichtshof [Federal Court of Justice] for a preliminary ruling in the actions pending before that court between
MUSIK-VERTRIEB MEMBRAN v GEMA
MUSIK-VERTRIEB MEMBRAN G M B H , Hamburg (Case 55/80),
K-TEL INTERNATIONAL, Frankfurt (Case 57/80)
and
GEMA — GESELLSCHAFT FÜR MUSIKALISCHE AUFFÜHRUNGS- UND MECHANISCHE VERVIELFÄLTIGUNGSRECHTE (a German copyright management society), Berlin,
on the interpretation of Article 30 et seq. of the EEC Treaty,
THE COURT
composed of: J. Mertens de Wilmars, President, P. Pescatore, Lord Mackenzie Stuart and T. Koopmans (Presidents of Chambers), A. O'Keeffe, G. Bosco and A. Touffait, Judges,
Advocate General : J.-P. Warner Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts and Issues
The orders making the references, the recordings (records and cassettes) from course of the procedure and the obser- other countries, including Member States vations submitted pursuant to Article 20 of the European Community, in which of the Protocol on the Statute of the those products were in free circulation, Court of Justice of the EEC may be into the Federal Republic of Germany. summarized as follows: The sound recordings were of musical works protected by copyright. Licences were granted in the country of manu- I — Facts and written procedure facture for the reproduction and distri- bution of the protected musical works (1) (a) Case 55/80 and the appropriate royalties were paid.
The undertaking Musik-Vertrieb membran GmbH imported sound
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
GEMA obtained a judgment from the records exported to Germany, of the Landgericht [Regional Court] Hamburg difference between the royalty fee paid ordering Musik-Vertrieb membran to in the United Kingdom and that charged supply detailed information about the in Germany. sound recordings imported by it into Germany from abroad since 1 April GEMA obtained a judgment from the 1973. GEMA had based its application Landgericht Frankfurt ordering K-tel to on Article 87 of the Copyright Law pay it in regard to the records imported (Urheberrechtsgesetz) on the ground from Germany the difference between that the defendant had infringed the the royalty fee paid in the United distribution rights of the authors Kingdom to MCPS by K-tel Inter- represented by GEMA and was therefore national Ltd., and that charged in liable to pay damages equivalent to the Germany. GEMA had sought that sum difference between the licence fee as damages payable under Article 97 of already paid abroad and the royalty in the Copyright Law (Urheberrechts- force in Germany. It was in order to be gesetz) on the ground that K-tel had able to put a figure to that difference infringed the distribution rights of the that GEMA initially confined itself to authors represented by GEMA. requiring information. When ruling on the appeal by the When ruling on the appeal by the defendant the Oberlandesgericht defendant the Hanseatisches Oberland- Frankfurt upheld the judgment given at esgericht upheld the judgment given at first instance. first instance. (2) In both cases the courts held that the right to distribute records in the (b) Case 57/80 Federal Republic of Germany was not exhausted by their entry into circulation in the United Kingdom and that the In 1974 the undertaking K-tel Inter- provisions of the EEC Treaty on the free national imported records from the movement of goods did not prevent the United Kingdom into the Federal difference between the royalty fees from Republic on which protected musical being claimed; more particularly, it was works were recorded. A licence to not a matter of a measure having an reproduce and distribute the protected effect equivalent to a quantitative musical works had been granted in the restriction. Accordingly, in Case 55/80, United Kingdom by the management they first upheld the claim for infor- company "Mechanical Copyright mation. Protection Society Ltd. (MCPS)", the copyright owner, to a sister company of K-tel, K-tel International Ltd. The English firm paid a royalty to MCPS. (3) The two undertakings Musik- The amount of that royalty is the same Vertrieb membran GmbH and K-tel as the rate demanded by MCPS for International (hereinafter called "the records intended to be marketed in the appellants") appealed against those United Kingdom. judgments on a point of law before the Bundesgerichtshof.
MCPS tried without success to obtain By two orders of 19 December 1979 the payment in the United Kingdom by K-tel Bundesgerichtshof stayed the proceed- International Ltd., in regard to the ings and in both cases referred the
MUSIK-VERTRIEB MEMBRAN v GEMA
following question to the court for a represented by Oliver Brändel, an preliminary ruling: Advocate at the Bundesgerichtshof, by the Government of the Kingdom of "Is it compatible with the provisions Belgium, by the Government of the concerning the free movement of goods Italian Republic and by the Commission (Article 30 et seq. of the EEC Treaty) for of the European Communities, a management company entrusted with represented by Götz zur Hausen, a the exploitation of copyrights to exercise member of its Legal Department. the exclusive rights held by the composer in Member State A to the transcription of his musical works onto sound recordings, their reproduction and II — Summary of the written marketing in such a way as to require, in observations submitted to respect of the marketing in Member the Court State A of sound recordings which have been produced and placed on the market (1) As to the rules applicable to copyright in Member State B — the composer's authorization being however restricted to The Commission summarizes the laws Member State B against payment of a and regulations applying to the repro- licence fee which is calculated on the duction and distribution of sound quantity and final selling price relevant recordings of musical works. to that Member State — a payment which is equal to the customary licence Legislative provisions fee in respect of production and marketing in Member State A, but which takes into account the (lower) licence fee Federal Republic of Germany which has already been paid in respect of production and marketing in Member Copyright in musical works in governed State B?" by the Copyright Law or Urheber- rechtsgesetz (hereinafter referred to as "the UrhRG") of 9 September 1965 The orders making the reference were (Bundesgesetzblatt I, p. 1273 — Bund- received at the Court Registry on 13 esgesetzblatt III, p. 440-1). That law February 1980. contains provisions relating to the so- By order of 2 July 1980 the Court called exploitation rights of an author. decided to join Cases 55/80 and 57/80 Article 15 thereof provides that an for the purposes of the oral procedure author has the exclusive right to exploit and the judgment. his work in a material form. That right includes the right of reproduction Upon hearing the report of the Judge- referred to in Article 16 of the UrhRG. Rapporteur and the views of the Reproduction also covers sound Advocate General, the Court decided to recordings of the work such as open the oral procedure without any recordings on record. The right of preparatory inquiry. exploitation further includes the right of distribution referred to in Article 17 of In accordance with Article 20 of the the UrhRG, that is to say, the right to Protocol on the Statute of the Court of offer for sale or put intro circulation the Justice of the EEC written observations original work of reproduction copies were submitted by the appellants, thereof. represented by Deringer, Tessin, Herrmann and Sedemund, of the Article 31 of the UrhRG provides that an Cologne Bar, by GEMA, the respondent author may grant a third party the right to the appeal on a point of law, to exploit his work. According to Article
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
32 that right of utilization [Nutzungs- United Kingdom recht] may be made subject, inter alia, to a territorial restriction. The law does not contain any provisions on the remun- Copyright is governed by the Copyright eration payable in return for the grant of Act of 1956 which defines copyright as rights of utilization. being inter alia the right to reproduce a work in a material form, to distribute it and where appropriate to authorize other Article 17 (2) of the UrhRG states the persons so to do (Sections 1 and 2). principle of the exhaustion of the right of distribution by virtue of which products put into circulation with the authoriz- The provisions contained in Section 8 of ation of the person who. owns that right the Copyright Act lay down special in the Federal Republic may be re- arrangements for copyright in the distributed. Finally, Article 97 of the recording of musical works for which UrhRG indicates the various remedies they make provision for a statutory available to an author should his licence. An author's copyright in a copyright be infringed. The author may musical work is not infringed by the require the removal of the infringement making of a sound recording if the of his copyright, an end to the infringing following conditions are fulfilled: activity and even damages in the case of records of the work must previously have deliberate or negligent breach of the law. been made, with a view to sale, by or with the licence of the author; the manu- facturer must give the author notice of his intention to reproduce his work for A law introduced at the same time as the the purposes of retail sale and pay him a Copyright Law governs the activity of licence fee of 6.25% of the ordinary "management companies". The Law on retail selling price of the record or the the Protection of Copyright and Related minimum royalty also laid down by the Rights of 9 September 1965 (Bundes- Act. gesetzblatt I, p. 1294 — Bundes- gesetzblatt III, p. 440-8) provides that authorization is required for the exercise of one or more rights based on the law The Act therefore entitles anyone to on copyright on behalf of one or more exploit artistic creations provided certain authors with a view to common conditions are fulfilled. In practice that exploitation and management. By virtue system means that the licence fee for the of Article 11 of the same law a manufacture and distribution of records management company is bound in is always fixed at 6.25% of the final respect of the rights which it holds to selling price; it means that no licensee is grant rights of utilization on reasonable willing to agree a higher royalty with the conditions to any person so requiring. author since he has only to wait until the Those rights are granted in return for record has been manufactured by fees fixed in the scales laid down and someone else in order to be able to published by the management company. reproduce the protected work on payment of the royalty provided for by the Act.
GEMA is the only management company in Germany which grants the right to Section 36 governs the assignment of exploit copyright in the form of the copyright (not to be confused with a manufacture and distribution of records. grant of a licence). According to
MUSIK-VERTRIEB MEMBRAN v GEMA
subsection (2) thereof an assignment may rights which they exercise. The be limited to certain countries. There is conclusion of those contracts arises from no provision for a territorial restriction the statute of the BIEM. One of BIEM's within one country. tasks is to draw up contracts intended to ensure that a management company may, in its own field of activity, also As regards the contractual relations of secure the protection of rights exercised the management companies by another management company.
Every management company in the Community which exercises rights of (2) As to the question raised by the mechanical reproduction and of distri- Bundesgerichtshof bution for musical works on behalf of authors is a member of the "Bureau international des sociétés gérant les The appellants point out that even if it droits d'enregistrement et de repro- were accepted that GEMA is entitled under German law to prohibit the impor- duction mécanique". That association tation of sound recordings or to make was created in 1929 under the name of their importation subject to the payment the "Bureau International de l'Edition of an additional fee, such an interpre- Mécanique" (BIEM). An agreement tation of German copyright law as well which became known as the "Standard as the exercise of those rights by GEMA agreement" was negotiated between would be contrary to the higher rules of BIEM and the "International Federation law constituted by Community law, in of the Phonographic Industry" (IFPI). particular Articles 30 and 36 of the Every management company refers to Treaty. that standard contract when concluding management contracts with record manufacturers. It is no longer disputed that the principle laid down in Case 78/70, Deutsche Grammophon v Metro (Judgment of 8 In regard to the amount of the licence June 1971, ECR 487) also applies to fee paid by a manufacturer, licence copyright; it is expressed as follows : contracts concluded with record manu- facturers are governed by the principle of the country of destination. When the "It is in conflict with the provisions pre- calculation basis for the fees is drawn up scribing the free movement of products a distinction is made between record within the common market for a manu- sales on national territory and record facturer of sound recordings to exercise sales abroad. In the case of exports the exclusive right to distribute the between European countries the basis for protected articles, conferred upon him by calculation is the sale price ruling in the the legislation of a Member State, in country of destination (Article V (7) of such a way as to prohibit the sale in that the BIEM standard contract). The fee State of products placed on the market rate for continental Europe is fixed at by him or with his consent in another 8% of that selling price for each record, Member State solely because such distri- while the fee may not be lower than a bution did not occur within the territory minimum amount. of the first Member State."
The various management companies are That case-law was confirmed by the bound amongst themselves by contracts judgments of 31 October 1974 in Case covering the mutual protection of the 15/74, Centrafarm v Sterling Drug
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
([1974] ECR 1147) and in Case 16/74, which tends to lead to the partitioning of Centra/arm v Winthrop ([1974] ECR those national markets. 1183). The appellants add that if the German That view is not challenged by GEMA legislation is interpreted in conformity which did not, moreover, expressly assert with Community law it is not possible to its right to prohibit the circulation of the infer from that legislation a right to the sound recordings in question. GEMA payment of the difference. Since GEMA believes, however, that the principle elab- is not entitled to prohibit the importation orated by the Court does not apply to of the sound recordings in question, the the claim for the difference between the distribution of them in the Federal (lesser) licence fee received in England Republic of Germany appears to be and the higher, corresponding licence fee lawful. However, a right to damages is payable in the Federal Republic ' of recognized under the terms of Article 97 Germany; in its opinion it is necessary of the German law on copyright only to to create equivalent conditions of the extent to which the copyright has competition for importers of sound been unlawfully infringed, that is to say, recordings and undertakings making in the present case, if the distribution of those sound recordings on national the sound recordings in Germany had territory. been unlawful.
On the other hand, the appellants refer They point out that GEMA has relied on to the case-law of the court to argue that the Commission's decision of 2 June it is immaterial in the present case 1971 (Journal Officiel 1971, No L 134, whether or not they are treated in the p. 15) by which the Commission decided same way as the manufacturers of sound with regard to GEMA that that decision recordings on the national territory who did not prevent it from demanding, are bound to pay, in total, the same where appropriate, from importers the royalty (Case 8/74, Dassonville, difference between the lesser licence fee judgment of 11 July 1974 [1974] ECR due in the country of origin and the 837; Case 41/76, Donckerwolcke, higher licence fee usually in force in the judgment of 15 December 1976 [1976] Federal Republic of Germany. However, ECR 1921; Case 13/77, Inno v ATAB, that decision was made in the context of judgment of 16 November 1977, [1977] a procedure brought under Regulation ECR 2115; Case 120/78, REWK No 17 and therefore based on Articles 85 judgment of 20 February 1979, [1979] and 86 of the EEC Treaty. ECR 649). Rather, what is decisive is the effect which such a measure has on In the view of the appellants the claiming inter-State trade. of a supplementary licence fee cannot be justified in regard to Article 36 of the Treaty. Such a claim certainly does not In the present case the act of requiring a belong to the specific subject-matter of supplementary royalty without doubt the right to protection, but forms part of constitutes an obstacle to the importation the exercise of that right. That follows of the sound recordings in question. from the judgment of the Court of Those sound recordings thus lose the 18 March 1980 in Case 62/79, Coditei cost advantage based on the market v Ciné Vog ([1980] ECR 881). relations existing in another Member State. The offsetting of the differences in price existing on the national markets in Consequently, it is likewise immaterial to question thereby becomes impossible, examine whether the higher royalty
MUSIK-VERTRIEB MEMBRAN v GEMA
chargeable in a Member State (in this In support of that argument GEMA first case the Federal Republic of Germany) is sets out the terms governing the tied to a higher royalty rate or to the exploitation of musical works protected fact that the retail selling prices used as a by copyright. In spite of the uniform basis for calculation are higher than in percentage of royalties the amounts England, for example. To the extent to received are very different from one which the royalty rates are different, the Member State to another owing to charging of a back-payment at the time appreciable differences in the price of of importation is in any event contrary to records. In the United Kingdom, because Article 30 of the EEC Treaty. Inasmuch of legislation on prices, the selling prices as the difference in royalty as an for sound recordings are lower than in absolute value is based on the aifferences the Federal Republic of Germany; that found to exist in the bases of calculation factor has an effect, therefore, on — the retail selling prices — the royalties in the two countries. The agreement made between GEMA and royalty is calculated on the basis of the MCPS of England, by which the licence licence rates applicable in the country of fees chargeable in each case cover only manufacture. However, if the applicant is the placing of the recordings in cir- planning to make exports abroad, the culation in that area covered by the management company is bound to grant management companies concerned, a marketing licence in accordance with involves the continued partitioning of the the scales in force in the country of national markets. destination. That rule is being circumvented by the appellants.
GEMA, the respondent to the appeal on GEMA argues that it is not appropriate a point of law, emphasizes that it is not to deprive the author of a share in the higher return attainable by those means seeking to prevent importation of the because a fair remuneration for the sound recordings in question. Its intellectual content of a protected work objective is rather that, where the must depend on the price which the exploitation of a musical work in the consumer is willing to pay for the Federal Republic of Germany is purchase of a copy. If, therefore, the concerned, in the case of sound amount obtainable as a result of sale recordings made abroad the same within the Federal Republic is higher royalties should be paid to the author as than had been assumed at the time of the must be paid by any person who manu- payment of the royalty — which was factures the same sound recordings with calculated on the basis of marketing in the author's consent in the Federal Great Britain — the principle of Republic of Germany and then puts them equivalence itself requires that the royalty into circulation. should be adapted to the profits which are actually obtainable.
The claiming of a back-payment The principle of the free movement of equivalent to the difference between the goods may not have the effect of royalties is compatible with the principles diminishing the right of an author to stated in Article 30 et seq. of the Treaty. receive fair remuneration for his GEMA states that satisfaction of such a intellectual effort for the benefit of those claim and, a fortiori, of the claim for who when exploiting protected works information, as a preparatory measure, take advantage of the differences existing cannot prevent the free movement of between national price structures in goods. order to make additional profits. It is
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
part of the very nature of copyright that v Ciné Vog ([1980] ECR 881) which the author should be entitled to have and states, inter alia: " . . . the rules of the retain the benefit of his intellectual Treaty cannot in principle constitute an effort. obstacle to the geographical limits which the parties to a contract of assignment have agreed upon in order to protect the If authors were to be denied the right to author and his assigns in this regard". payment of the difference in royalties an obstacle to the distribution of works protected by copyright would thereby be The Government of the Italian Republic created. In the future authors would be observes that GEMA has brought an forced to grant performing and distri- action against two legal entities which bution right only in the Member State are third parties in relation to the licence with the highest royalties. contracts.
The extra payment claimed by GEMA It gives a summary of the Italian and the compatibility of such a claim legislation on copyright from which it with Article 30 et seq. of the Treaty stems emerges that an author has the exclusive after all from reliance on a factual right to introduce reproductions made situation approved by the EEC abroad into the territory of the State for Commission. The practical arrangements the purpose of putting them into circu- for collecting the extra royalties are lation. based on the Commission's decision of 2 June 1971 (cited above). GEMA should have been able to rely on the content of The present dispute is not concerned that decision. with the prohibition on the importation of goods but only with a debt consisting of supplementary royalties. Therefore it GEMA then goes on to examine the is doubtful whether Article 30 et seq. of question whether in the case of a limited the Treaty and the case-law of the Court territorial licence the granting of a relevant thereto may have application to licence in a Member State automatically this case. involves the exhaustion of copyright in the other Member States. It believes that even if that question were answered in The breaking-up of the Common the affirmative that would not mean that Market into several national markets as the author, by analogy with the the result of territorial restrictions on exhaustion of his right to protection in intellectual property rights cannot be the whole of the Common Market, also regarded as a "means of arbitrary loses the right to claim a royalty discrimination" or as "a disguised equivalent to that paid in the country of restriction on trade between Member distribution it argues, however, that such States" (Article 36 of the EEC Treaty). a far-reaching effect of the exhaustion That situation is only the reflection of principle would not be justified in the particular manner in which the relation to copyright since an author's bodies of copyright laws are currently ability to grant a right of exploitation arranged. limited in time, in space or in content is part of the essential nature of copyright. In conclusion, the Italian Government proposes that the question referred to the That view is borne out by the judgment Court should be answered in the af- of 18 March 1980 in Case 62/79, Coditei firmative.
MUSIK-VERTRIEB MEMBRAN v GEMA
The Government of the Kingdom of the distribution of reproduction copies of Belgium states that an author's remu- a work, which is claimed on the basis of neration is tied to the selling price of copyright. In actual fact it amounts to a the sound recordings. Consequently an claim for damages. It is certainly not a author's remuneration varies with the right to remuneration founded upon the prices of the sound recordings in the licence contract concluded with the various Member States. If, in the case of manufacturer of the sound recordings imports into a country in which prices which is claimed in the present case. are higher, an author is barred from claiming a payment in addition to the lower one previously received in the country of origin, copyright is infringed. An obligation on the importer to make good the damage suffered would affect the free movement of goods just as seriously as a prohibition on marketing. The Belgian Government adds that the The importer would lose the possibility sound recordings in suit in Case 57/80 of importing into a Member State, freely were imported from the United and unhindered, goods bought in Kingdom, where the author's payment another Member State where they were is calculated on a statutory scale in free circulation. (Copyright Act, Section 8). If the author could not therefore claim an additional payment in the other countries of the Community on the basis of the rates Furthermore, the derogation contained freely agreed as is the practice in those in the first sentence of Article 36 of the countries, that would mean that the Treaty cannot have application in the statutory rates of the United Kingdom present case. would be extended throughout the Community, which would be contrary to Article 13 (2) of the Berne Convention for the Protection of Literary and Although copyright may not be regarded Artistic Works (1948 Brussels version), as strictly comparable to industrial or of which all the Member States are commercial property, nevertheless there signatories. is justification for including it by analogy within the scope of application of Article 36, at least when the copyright work It concludes that the question should be is produced in a material form which answered in the affirmative. is dealt in commercially and is consequently caught by the provisions on the free movement of goods. The Commission submits that the recognition of a right to the payment of the difference between the licence fee On the other hand, the Court's case-law normally paid in Germany and that pre- establishes the principle that the pro- viously paid in the country of manu- prietor of an industrial and commercial facture constitutes a measure having an property right which is protected by the effect equivalent to a quantitative legislation of a Member State may not restriction. rely on that legislation to resist the importation of a product which has been lawfully placed on the market in another The right relied on by GEMA in fact Member State by or with the consent of flows directly from the right to prevent the proprietor himself.
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
The Commission believes that the same by economic factors alone and is not principle must likewise apply in regard to artificially controlled by Government copyright inasmuch as an author measures such as those referred to in exercises his right when he exploits his Article 30 or by the action of private work by manufacturing and distributing traders in the nature of restrictions on reproduction copies thereof. In such competition. The existence of different cases an author should not be treated market conditions is the last argument any differently from an inventor which may be used to justify measures exploiting his patent in the same fashion. which have a restrictive effect on trade.
The Commission further submits that The Commission's decision of 2 June actions for a declaration that rights have 1971 concerning GEMA (cited earlier) been infringed are not covered in the was adopted pursuant to Article 86 of present case by Article 36. The bringing the Treaty. The question whether of such an action against reproduction copyright is exhausted in another copies lawfully put into circulation is no Member State was left open expressly. more part of the "subject-matter" of For the rest that decision may not, for copyright than the prohibition on the legal reasons, in any way affect the further marketing of those products. validity of Article 30 et seq. of the Treaty.
The Commission points out that a judgment of the Court of Appeal in In conclusion, the Commission proposes Brussels came to the conclusion which it that the Court should answer the considers to be correct in the present question referred to it as follows : case (judgment of 26 October 1976, SABAM v TIME, Journal des Tribunaux 1979, p. 407). "That a copyright management as- sociation empowered to enforce such rights should have the right in a Member In addition to giving reasons based on State to take action in respect of copyright, the judgment of the Ober- infringement of copyright against anyone landesgericht expresses the consideration who markets products in that State that the offsetting of the difference which were put into circulation in between licence fees is in any event another Member State by or with the justified by the fact that it helps to consent of the author is contrary to the eliminate disparities in conditions of provisions on the free movement of competition which exist between the goods within the Common Market". different national markets. By taking that line of argument, so the Commission believes, that decision misconstrues the basic principle of the Common Market. Without doubt goods are produced and III — Oral procedure marketed within the Community under different conditions, but the Community has given itself the specific task of abolishing those differences by ensuring, At the hearing on 8 October 1980, mainly by virtue of the establishment of the appellants represented by Arved the free movement of goods, that the Deringer, GEMA, represented by Oliver production and sale thereof is governed Brändel, the Government of the French
MUSIK-VERTRIEB MEMBRAN v GEMA
Republic, represented by Henri Marty- The French Government then went on to Gauquie, and the Commission of the observe that whereas the majority of the European Communities, represented by parties to the Berne Convention are Mr Götz zur Hausen, submitted oral governed by the system of contractual argument. royalties, Article 13 (1) of the Convention provides that contracting The French Government pointed out that parties may, by way of derogation from it is necessary to distinguish the the Convention, institute in their legal copyright of an author of an artistic systems a scheme for statutory licences work from that of a manufacturer of with a maximum rate of remuneration. sound recordings. As the rights of a manufacturer are restricted to marketing, his rights are therefore comparable to The United Kingdom, for example, has industrial and commercial property instituted a scheme of statutory royalties. rights. An author, on the other hand, has However, Article 13 of the Berne a moral right which, irrespective of any Convention also provides that... economic purpose, may lead him to "such . . . conditions shall apply only in refuse to allow his work to be exported the countries which have imposed them". to a given geographical area or, possibly, to impose a number of conditions on The Advocate General delivered his such exportation according to his own opinion at the sitting on 11 November chosen criteria. 1980.
Decision
1 By two orders dated 19 December 1979, which were received at the Court on 13 February 1980, the Bundesgerichtshof [Federal Court of Justice] referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of Article 30 et seq. of the Treaty.
2 That question has been raised in the context of two disputes between GEMA, a German copyright management society, and two undertakings which imported into the Federal Republic of Germany sound recordings of protected musical works. In Case 55/80 the imports consisted of gramophone records and musical tape cassettes from various countries, including other Member States of the Community and in Case 57/80 the importation consisted of a consignment of 100 000 gramophone records from the United Kingdom. It is common ground that the sound recordings from other Member States had been manufactured and marketed in those Member
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
States with the consent of the owner of the copyright in the musical works concerned, and that the requisite licences had been granted by those owners and the appropriate royalties had been calculated only on the basis of distri- bution in the country of manufacture.
3 GEMA contends that the importation of those sound recordings into German territory constitutes an infringement of the copyrights which it is responsible for protecting in the name of the owners of those rights. As a result it considers that it is entitled to claim payment of the royalties payable on sound recordings put into circulation on German territory less the amount of the lower royalties already paid in respect of distribution in the Member State of manufacture.
4 The Bundesgerichtshof has stated that under German law the fact that the composers involved consented to their musical works' being reproduced in another Member State of the Community and put into circulation on the territory of that Member State in return for a royalty calculated according to the number of copies sold and the retail selling price in that Member State does not prevent them from claiming, pursuant to the exclusive exploitation right which they hold on the German market when sound recordings are distributed on that market, the royalties ordinarily paid on that market, which are calculated according to the number of copies sold and the retail selling price prevailing on the domestic market, less the royalties already paid in respect of distribution in the Member State of manufacture.
5 However, the national court questions whether such an exercise of copyright is compatible with the provisions of the Treaty relating to the free movement of goods. It has brought the matter before the Court in order to clarify this point.
6 From the papers placed before the Court it seems that in the two disputes before the German courts GEMA based its case on Article 97 of the German Law on Copyright (Urheberrechtsgesetz), a provision setting forth the various remedies which are available to an author should his copyright be infringed and which include actions requiring the person infringing the copyright to put an end to the infringement, to desist therefrom and to pay damages.
7 In those circumstances the question submitted by the national court is in effect whether Articles 30 and 36 of the Treaty must be interpreted as pre- cluding the application of national legislation under which a copyright management society empowered to exercise the copyrights of composers of
MUSIK-VERTRIEB MEMBRAN v GEMA
musical works reproduced on gramophone records or other sound recording in another Member State is permitted to invoke those rights where such sound recordings are distributed on the national market after having been put into circulation in the Member State of manufacturer by or with the consent of the owners of those copyrights in order to claim payment of a fee equal to the royalties ordinarily paid for marketing on the national market less the lower royalties paid in the Member State of manufacture for marketing in that Member State alone.
8 It should first be emphasized that sound recordings, even if incorporating protected musical works, are products to which the system of free movement of goods provided for by the Treaty applies. It follows that national legislation whose application results in obstructing trade in sound recordings between Member States must be regarded as a measure having an effect equivalent to a quantitative restriction within the meaning of Article 30 of the Treaty. That is the case where such legislation permits a copyright management society to object to the distribution of sound recordings orig- inating in another Member State on the basis of the exclusive exploitation right which it exercises in the name of the copyright owner.
9 However, Article 36 of the Treaty provides that the provisions of Article 30 to 34 shall not preclude prohibitions or restrictions on imports justified on grounds of the protection of industrial and commercial property. The latter expression includes the protection conferred by copyright, especially when exploited commercially in the form of licences capable of affecting distri- bution in the various Member States of goods incorporating the protected literary or artistic work.
10 It is apparent from the well-established case-law of the Court and most recently from the judgment of 22 June 1976 in Case 119/75 Terrapin Overseas Ltd. [1976] ECR 1039 that the proprietor of an industrial or commercial property right protected by the law of a Member State cannot rely on that law to prevent the importation of a product which has been lawfully marketed in another Member State by the proprietor himself or with his consent.
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
1 1 In the proceedings before the Court the French Government has argued that that case-law cannot be applied to copyright, which comprises inter alia the right of an author to claim authorship of the work and to object to any distortion, mutilation or other alteration thereof, or any other action in relation to the said work which would be prejudicial to his honour or repu- tation. It is contended that, in thus conferring extended protection, copyright is not comparable to other industrial and commercial property rights such as patents or trade-marks.
12 It is true that copyright comprises moral rights of the kind indicated by the French Government. However, it also comprises other rights, notably the right to exploit commercially the marketing of the protected work, par- ticularly in the form of licences granted in return for payment of royalties. It is this economic aspect of copyright which is the subject of the question submitted by the national court and, in this regard, in the application of Article 36 of the Treaty there is no reason to make a distinction between copyright and other industrial and commercial property rights.
1 3 While the commercial exploitation of copyright is a source of remuneration for the owner it also constitutes a form of control on marketing exercisable by the owner, the copyright management societies acting in his name and the grantees of licences. From this point of view commercial exploitation of copyright raises the same issues as that of any other industrial or commercial property right.
1 4 The argument put to the Court by the Belgian and Italian Governments that in the absence of harmonization in this sector the principle of the terri- toriality of copyright laws always prevails over the principle of freedom of movement of goods within the Common Market cannot be accepted. Indeed, the essential purpose of the Treaty, which is to unite national markets into a single market, could not be attained if, under the various legal systems of the Member States, nationals of those Member States were able to partition the market and bring about arbitrary discrimination or disguised restrictions on trade between Member States.
MUSIK-VERTRIEB MEMBRAN v GEMA
15 It follows from the foregoing considerations that neither the copyright owner or his licensee, nor a copyright management society acting in the owner's or licensee's name, may rely on the exclusive exploitation right conferred by copyright to prevent or restrict the importation of sound recordings which have been lawfully marketed in another Member State by the owner himself or with his consent.
16 GEMA has argued that such an interpretation of Articles 30 and 36 of the Treaty is not sufficient to resolve the problem facing the national court since GEMA's application to the German courts is not for the prohibition or restriction of the marketing of the gramophone records and tape cassettes in question on German territory but for equality in the royalities paid for any distribution of those sound recordings on the German market. The owner of a copyright in a recorded musical work has a legitimate interest in receiving and retaining the benefit of his intellectual or artistic effort regardless of the degree to which his work is distributed and consequently it is maintained that he should not lose the right to claim royalties equal to those paid in the country in which the recorded work is marketed.
17 It should first be observed that the question put by the national court is concerned with the legal consequences of infringement of copyright. GEMA seeks damages for that infringement pursuant to the applicable national legislation and it is immaterial whether the quantum of damages which it seeks is calculated according to the difference between the rate of royalty payable on distribution in the national market and the rate of royalty paid in the country of manufacture or in any other manner. On any view its claims are in fact founded on the copyright owner's exclusive right of exploitation, which enables him to prohibit or restrict the free movement of the products incorporating the protected musical work.
18 It should be observed next that no provision of national legislation may permit an undertaking which is responsible for the management of copyrights and has a monopoly on the territory of a Member State by virtue of that management to charge a levy on products imported from another Member State where they were put into circulation by or with the consent of the
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
copyright owner and thereby cause the Common Market to be partitioned. Such a practice would amount to allowing a private undertaking to impose a charge on the importation of sound recordings which are already in free circulation in the Common Market on account of their crossing a frontier; it would therefore have the effect of entrenching the isolation of national markets which the Treaty seeks to abolish.
19 It follows from those considerations that this argument must be rejected as being incompatible with the operation of the Common Market and with the aims of the Treaty.
20 GEMA and the Belgian Government have represented to the Court that, in any event, a system of free movement of sound recordings may not be permitted as regards sound recordings manufactured in the United Kingdom because the provisions of section 8 of the United Kingdom Copyright Act 1956 have the effect of instituting a statutory licence in return for payment of a royalty at a reduced rate and the extension of such a statutory licence to other countries is contrary to the provisions of the Berne Convention for the Protection of Literary and Artistic Works.
21 Section 8 of the Copyright Act provides in effect that the copyright of a composer of a musical work is not infringed by the manufacture of a sound recording of that work if the work has already been reproduced in the United Kingdom on a sound recording for the purpose of retail sale by the author himself or with his consent and if, in addition, the manufacturer notifies the copyright owner of his intention to make a recording of the work for the purpose of sale and pays him a royalty of 6 - 2 5 % of the retail selling price of the sound recording.
22 It appears from the papers before the Court that the practical result of that system is that the royalty for any manufacture of a sound recording is established at 6· 2 5 % of the retail selling price since no prospective licensee is willing to agree to a higher rate. As the rate of 6 - 2 5 % is thus the rate which is in fact agreed for contractual licences, the United Kingdom legislation has the effect of putting a ceiling on the remuneration of the copyright holder.
MUSIK-VERTRIEB MEMBRAN v GEMA
23 Where, therefore, a copyright management society exercising an exclusive right of exploitation in the name of an owner claims the difference between the rate of 6-25% already paid and that charged on its domestic market, it is in fact seeking to neutralize the price differences arising from the conditions existing in the United Kingdom and thereby eliminate the economic advantage accruing to the importers of the sound recordings from the establishment of the Common Market.
24 As the Court held in another context in its judgment of 31 October 1974 in Case 15/74 Centrafarm BV and Adriaan De Peijper v Sterling Drug Inc. [1974] ECR 1147, the existence of a disparity between national laws which is capable of distorting competition between Member States cannot justify a Member State's giving legal protection to practices of a private body which are incompatible with the rules concerning free movement of goods.
25 It should further be observed that in a common market distinguished by free movement of goods and freedom to provide services an author, acting directly or through his publisher, is free to choose the place, in any of the Member States, in which to put his work into circulation. He may make that choice according to his best interests, which involve not only the level of remuneration provided in the Member State in question but other factors such as, for example, the opportunities for distributing his work and the marketing facilities which are further enhanced by virtue of the free movement of goods within the Community. In those circumstances, a copyright management society may not be permitted to claim, on the import- ation of sound recordings into another Member State, payment of additional fees based on the difference in the rates of remuneration existing in the various Member States.
26 It follows from the foregoing considerations that the disparities which continue to exist in the absence of any harmonization of national rules on the commercial exploitation of copyrights may not be used to impede the free movement of goods in the Common Market.
JUDGMENT OF 20. 1. 1981 — JOINED CASES 55 AND 57/80
27 The answer to the question put by the Bundesgerichtshof should therefore be that Articles 30 and 36 of the Treaty must be interpreted as precluding the application of national legislation under which a copyright management society empowered to exercise the copyrights of composers of musical work reproduced on gramophone records or other sound recordings in another Member State is permitted to invoke those rights where those sound recordings are distributed on the national market after having been put into circulation in that other Member State by or with the consent of the owners of those copyrights, in order to claim payment of a fee equal to the royalties ordinarly paid for marketing on the national market less the lower royalties paid in the Member State of manufacture.
Costs
The costs incurred by the Belgian Government, the Government of the Italian Republic, the Government of the French Republic and the Commission of the European Communities, which have submitted obser- vations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main actions are concerned, in the nature of a step in the actions pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT,
in answer to the question submitted to it by the Bundesgerichtshof by two orders of 19 December 1979, hereby rules:
Articles 30 and 36 of the Treaty must be interpreted as precluding the application of national legislation under which a copyright management society empowered to exercise the copyrights of composers of musical works reproduced on gramophone records or other sound recordings in another Member State is permitted to invoke those rights where those sound recordings are distributed on the national market after having
MUSIK-VERTRIEB MEMBRAN v GEMA
been put into circulation in that other Member State by or with the consent of the owners of those copyrights, in order to claim the payment of a fee equal to the royalties ordinarly paid for marketing on the national market less the lower royalties paid in the Member State of manufacture.
Mertens de Wilmars Pescatore Mackenzie Stuart
Koopmans O'Keeffe Bosco Touffait
Delivered in open court in Luxembourg on 20 January 1981.
A. Van Houtte J. Mertens de Wilmars Registrar President
O P I N I O N OF MR ADVOCATE GENERAL WARNER DELIVERED O N 11 NOVEMBER 1980
My Lords, appellant is the Firma Musik-Vertrieb membran GmbH, which carries on business in Hamburg as an importer and These two cases come before the Court distributor of sound recordings. In Case by way of references for preliminary 57/80 the appellant is the Firma K-tel rulings by the Bundesgerichtshof. In each International GmbH, which carries on a of them the respondent in the similar business in Frankfurt-am-Main. proceedings before that court is the Essentially the question at issue between GEMA or, to give it its full name, the GEMA, and the appellants is whether the Gesellschaft für Musikalische Auf- the latter are liable to make payments to führungs- und Mechanische Verviel- the GEMA in respect of the copyright in fältigungsrechte. In Case 55/80 the musical works reproduced on recordings