C-158/86

The Court is thus called upon for the second time to ascertain the limits which, within the Common Market, may be set on the free movement of video-cassettes. In the The problem raised in the present case is first dispute (Joined Cases 60 and 61/84 different. The obstacle to the free movement Cinéthèque v Fédération nationale des of the cassettes imposed by the national cinémas français) the matter at issue was the legislation is situated not at the beginning prohibition imposed on French producers but at the end of the process of showing the and distributors, restraining them from film, because, as will be seen more clearly selling or hiring out cassettes — including below, the prohibition on hiring-out relates those originating in France itself — while to film recordings which have already been the film was being shown in French shown in cinemas for some time. In this cinemas. As the Court will recall, it held case, therefore, it is not a question of (judgment of 11 July 1985 [1985] ECR tempering the principle laid down in Article 2605, at paragraph 22) that '. . . the 30 of the EEC Treaty — and hence the application of such a system may create rights of whoever imports cassettes — with barriers to intra-Community trade in video- the protection of a public interest such as cassettes because of the disparities between the safeguarding of the cinematographic the systems operated in the different industry; rather, the Court will need to Member States and between the conditions ascertain the extent to which the importer's for the release of cinematographic works in claim to the unrestricted use of the cassette the cinemas of those States'. which he has purchased in the Common

3. Before the facts of the case are set out it is appropriate to inquire how the Member 2. It is generally known that, owing to States regulate copyright in the field of technological advances in the recording and cinematography, the hiring-out of video- reproduction of sound and images on tape, cassettes and the exhaustion of the rights in the market for video-cassettes has been question. In Great Britain the Copyright Act developing continously for many years. It 1956 confers on the maker of a film the should also be said that, for reasons of right to prohibit its reproduction, public convenience which are self-evident, the performance and broadcast by television. As average consumer purchases cassettes only far as cassettes are concerned, it is always in special cases (educational and children's for the maker of the film to decide whether films, pornographic films, musical comedies, to proceed with sale first and hire later or operas and cinema classics) and usually he vice versa. In the case of sale, however, his tends to hire them. It is, however, the film right must be considered exhausted: that is companies which decide in each case where to say, he will not be able to restrain the and how — whether by sale or by subsequent hiring-out of the work by third hire — the film is to be marketed, once it parties or demand any compensation when has completed its run in the cinemas. they do so. On the other hand, he can protect himself by inserting in the contract a clause which obliges the purchaser to refrain from hiring out the recording or by fixing the price so as to take account of the prospect of the cassette's being hired out. In the light of those factors it is natural that the owner of a film and those entitled under him should have an interest in defining the sale and the hiring-out of the cassettes in question as distinct and autonomous forms of Analogous principles underlie Irish, exploitation, so that the first form may Netherlands and German legislation. In the exclude the right to use the second. It is Federal Republic of Germany in particular, precisely in that context that the question two judgments of the Bundesgerichtshof referred to the Court arises. If it is assumed (Federal Court of Justice) of 6 March and that consumers' preference for hire remains 15 May 1986, reported in GRUR 1986, pp. unchanged by technological progress and 736 and 743, have established that the hence by the foreseeable decline in the cost owner of the right to market cassettes of the product in the years to come, it is containing musical or cinematographic necessary to ascertain whether the works which are sold with his consent autonomy referred to above affects the cannot prohibit third parties from hiring Community principle of the exhaustion of them out. Paragraph 27 of the Urheber- copyright. If it does, then the copyright rechtsgesetz (Copyright Law) of 9 owner who has sold the cassette recording September 1965 does, however, confer on of a film of his in one Member State such a person the right to fair compen- without surrendering the rental right will be sation.

The opposite principle is adopted by out the recording, claiming that they had Denmark and France. In Denmark the not granted any authorization, either hiring-out to third parties of cassettes express or implied, for that purpose. Their lawfully available for purchase on the application was granted and, in subsequent market is always subject to the prior auth- proceedings for confirmation of the orization of the owner of the work, whose injunction, the Østre Landsret (Eastern rights are not exhausted by its sale (see Division of the High Court), by an order Articles 2 and 23 of Law N o 158 of 31 May dated 11 June 1986, referred the following 1961, the latter article as amended by Law question to the Court of Justice for a N o 274 of 16 June 1985). In France, Article preliminary ruling: 26 of the Law of 3 July 1985 confers directly on the videogram manufacturer the right to authorize hiring-out and, according to academic legal writing, that right is not The Danish court asked whether, for the subject to exhaustion even if the recording purposes of Articles 30 and 36 of the EEC

4. On 4 July 1984 Mr Erik Viuff Chris- tiansen arranged for an advertisement to appear in a Copenhagen daily newspaper, announcing that the cassette of the film 5. In the proceedings before the Østre 'Never Say Never Again' in its original Landsret, written observations were version (that is, without Danish subtitles) submitted by the parties to the main was available for hire from his shop. The proceedings, the Commission of the local James Bond fans were delighted European Communities and the Govern- because until then the cassette had not been ments of Denmark, the United Kingdom obtainable on the Danish market. Indeed, and France, all of which, apart from the last Christiansen had purchased it a few days two, also presented argument at the hearing. earlier in London, where it had just been released for sale by the producers of the

WARNER BROTHERS AND ANOTHER / CHRISTIANSEN

were systematically to withhold authori- in question . . . '. In this case it is not in zation or to make it subject to excessively dispute that Warner Brothers decided quite onerous conditions, importation might cease freely to sell the cassette of 'Never Say altogether. Christiansen is in agreement on Never Again'; furthermore, in setting the that point. Although, he states, the court price, it undoubtedly took account of the order obtained by the applicant companies rights over its exploitation by way of hire. relates to the hiring-out of the cassette and Even in that respect, therefore, it is contrary not also to its entry into Denmark, there is to Articles 30 and 36 of the Treaty to allow no doubt that since Danish consumers are Warner Brothers to restrain Christiansen not interested in purchasing the recording, from hiring out in Denmark the recording the order will ultimately remove any which he has lawfully purchased in the incentive for its importation from the United Kingdom. United Kingdom. It is thus obvious that Article 30 of the Treaty is infringed.

OPINION OF MR MANCINI — CASE 158/86

Having made that preliminary observation, principle that he may prohibit a public the Commission, following the Court's performance of his film. In conclusion, the reasoning in the Cinéthèque Judgment, hiring-out of cassettes is to be seen as a maintains that the prohibition imposed by central feature of the exclusive right vested Danish legislation applies equally to in the owner of copyright in the work, and cassettes produced in Danish territory and it follows that making the exercise of that thus does not seek to influence the patterns right conditional on his authorization is of trade between the Member States. But compatible with the Treaty. these trade patterns may be adversely affected by that prohibition. The contested provision will therefore be compatible with the principle of the free movement of goods 7. The viewpoint summarized above cannot only if (a) the obstacles to intra-Community trade raised by that provision do not exceed be accepted. I consider that the two what is strictly necessary for the attainment premises on which it is based — namely that of the objective pursued, and (b) that the author has the exclusive right to objective is justifiable under the Treaty. And authorize the hiring-out of cassettes and that is precisely the situation in the present that that form of exploitation is merely a case. manifestation of his broader right to perform the work — are, respectively, irrelevant to the issue before us and indefensible.

WARNER BROTHERS AND ANOTHER / CHRISTIANSEN

Court is called upon to establish whether, This last principle is decisive, and I consider from the Community viewpoint, the maker the argument put forward by Warner of a film circulating in cassette form still has Brothers and Metronome, to the effect that the exclusive right to conduct the business hiring-out is a form of economic exploi- of hiring out his work. Rather, the Østre tation distinct from and independent of sale Landsret is asking this Court whether the (see Section 2 above), to be totally at odds purchaser of a cassette sold in one Member with it. The reasons are obvious. Once the State by the owner of copyright in the film maker of a film has sold the cassette to a (or with his consent) may hire it out to third third party, thereby transferring perma- parties in another Member State against the nently his proprietary right over the copyright owner's will; in short, the Danish recording and permitting it to circulate court wishes to know whether the principle freely, he may not thereafter avail himself of of the exhaustion of copyright is applicable the provisions of another State so as to also in this instance. assert his exclusive right over the work recorded on the cassette and thereby in practice prevent it from entering that State. Such a claim is motivated by the same 8. I would point out in the first place that, economic interests which underlay the according to the consistent case-law of the original disposal of the work; and, if that is Court, 'All trading rules enacted by Member so, the claim must yield to the rule under States which are capable of hindering, Article 30. To quote the GEMA judgment directly or indirectly, actually or potentially, once again: 'the essential purpose of the intra-Community trade are to be considered T r e a t y . . . could not be attained if, [on as measures having an effect equivalent to account of] the various legal systems of the quantitative restrictions.' ( j u d g m e n t of 11 Member States, nationals of those Member July 1974 in Case 8/74 Procureur du Roi v States were able to partition the market and Dassonville [1974] ECR 837, at paragraph bring about arbitrary discrimination or 5). disguised restrictions on trade between Member States' (paragraph 14).

citizens, what they may obtain as of right other Member States. The replies given are under the Treaty. vague and contain figures which are not capable of comparison. However, the All this does not, of course, imply that Commission observes that the information where a cassette which has already been could not have been more accurate. The lawfully sold in another Member State is marketing of cassettes varies appreciably hired out the property rights of the owner from one country to the next. In Great of the copyright in the cinematographic Britain, for example, the last four years have work are left completely unprotected. seen a large increase in sales whereas in Mention has been made, for example, of the Denmark such recordings continue to be right to compensation and of the possibility distributed mainly by way of hire. for the author to safeguard his position by inserting appropriate clauses into the contract of sale. One point, however, What, then, is the conclusion to be? One remains firmly established, and that is that, can only repeat what the Court has already whatever its form or content may be, the established: an author may choose freely, protection granted to the author may not and in accordance with various factors, obstruct the free movement of cassettes where in the Community he will put his once they have been marketed. work into circulation but he may not take advantage of the 'disparities which continue In that connection the Court requested the to exist in the absence of any harmonization United Kingdom to state whether the of national rules on the commercial exploi- purchase price of a video-cassette in the tation of copyrights [so as] to impede the United Kingdom includes a copyright free movement of goods in the Common component and, if so, what inferences are to Market' (GEMA judgment, cited above, be drawn in regard to hiring it out in the paragraph 26).