Resolving the Conflict Between Copyright and EU Single Market in Audiovisual Licensing

T H E UNRESOLVED CONFLICT IN THE RELATIONSHIP BETWEEN COPYRIGHT
COMPETITION LAW AND THE INTERNAL M A R K E T
IN THE CONTEXT OF
A U D I O V I S U A L B R O A D C A S T L I C E N S E S
CANDIDATE NON14759

N14759
ABSTRACT
Copyright's territoriality, as exercised through a licensing strategy that defines and
splits up markets along national boundaries, such as that prevalent in audiovisual
broadcasting, is in conflict with the European Union's imperative of a single market.
The paper suggests that to date there has not been a satisfactory resolution of this
conflict, from either the case law of the Court of Justice, or the Commission's
harmonizing copyright directives, and that this has resulted in lack of clarity for
stakeholders. Two very current challenges to these territorial licensing practices are
reviewed. The first emanates from the UK High Court's Article 267 reference to the
Court, and involves the territorial licensing of live football rights. The Advocate
General's opinion has deemed these territorial satellite broadcast licenses to be both a
breach of internal market law and of competition law. A decision by the Court that
follows the Advocate General opinion will necessitate changes. The most recent
challenge comes from the Commission's legislative proposals advocating pan-
European licensing, an EU copyright code, and an optional EU copyright title. These
proposals are targeted at the audiovisual broadcasting industry by way of the
Audiovisual Green Paper. In reviewing the Commission proposals, the paper suggests
that the development of pan-European audiovisual broadcast licenses should remain
voluntary and market driven, not imposed via legislation. They should however
continue to be guided by the Commission's soft law, and the adoption of an industry
code of practice. The paper concludes that the creation of an optional unitary
copyright title, with resultant enhanced legal security and transparency, will
encourage right holders of audiovisual rights to license on the basis of this title, thus
creating a true audiovisual single market for Europe.

TABLE OF CONTENTS
1. INTRODUCTION 1
2. THE TERRITORIALITY OF COPYRIGHT 4
3. THE TERRITORIALITY OF BROADCAST LICENSES 6
3.1 The Benefits of Territorial Licensing 6
3. 2 The National/Regional Ambit of Broadcast Licenses 8
4. THE CONFLICT WITH THE SINGLE MARKET OBJECTIVE 10
4.1 Territorial Licenses and the Free Movement of Goods 10
4.2 Territorial Licenses and Article 101(1) 12
4.2.1 Exclusive Territorial Licenses 13
4.2.2 Exclusive Territorial Licenses Granting Absolute Territorial Protection 14
5. GREATER LENIENCY FOR PERFORMANCE COPYRIGHT LICENSES? 15
5.1 Performance Copyright and the Free Movement Rules 16
5.2 Performance Copyright and Article 101(1) 20
5.2.1 Performance Copyright Licenses Granting Absolute Territorial Protection 20
6. THE COPYRIGHT HARMONIZING DIRECTIVES WITH A BROADCAST AMBIT 22
6.1 The Satellite and Cable Directive 23
6.2 The Information Society Directive 25
7. NEW CHALLENGES TO THE TERRITORIALITY OF BROADCAST LICENSING 28
7.1 A challenge from the UK High Court 28
7.1.1 Analysis of Advocate General Kokott's opinion 29
7.2 A Challenge from the Commission's 'Soft Law' 35
8. THE WAY FORWARD AND CONCLUSION 38
BIBLIOGRAPHY 42

N14759
1. INTRODUCTION
This paper explores the unresolved conflict in the relationship between copyright,
competition law and the internal market, in the context of territorial audiovisual
broadcast licenses. Recent challenges to this relationship from the Football
Association Premier League Ltd (FAPL) cases currently before the Court of Justice,1
as well as the European Commission's Green Paper 'On the Online Distribution of
Audiovisual Works in the European Union',2
exemplify the pressing need for a
resolution of this conflict. This will lead to a change in these broadcast licensing
models. The paper will review options for change.
The paper first outlines the conflict. Copyright, by virtue of the principle of
territoriality, is strictly limited to the territorial boundaries of the Member State where
the right is granted. Copyright licenses are not legally so restricted: they can be multi-
territorial or European Union ("EU") wide. In the area of commercial broadcasting of
audiovisual content, the choice is for the ambit of the license to be national. This
territorial broadcasting strategy is a means of maximizing revenue and is arguably
necessitated by predominantly national geographic markets for audiovisual content. It
results in a territorial partitioning of this market. In the context of European
integration, this broadcast licensing practice is in conflict with the imperatives of a
borderless single market, created by a supranational legal order. This is now highly
significant in an online single market.
The paper then sets out to examine, through a review of the pertinent decisional
practice of the European Commission ("Commission") and the case law of the Court
of Justice ("the Court"), how this conflict has been addressed, both in relation to the
1
Joined cases C-403/08 and (M29/08 [2011] The Football Association Premier League Ltd and Others v QC
Leisure and Others, and Karen Murphy v Media Protection Sen-ices Ltd [20II].
2
European Commission Green Paper 'On the Online Distribution of Audiovisual Works in the European Union:
Opportunities and Challenges Towards a Digital Single Market' (Audiovisual Green Paper) COM 427/4, Brussels
13 July 2011.
1

N14759
free movement rules of the Treaty, as well as competition law's Article 101(1). It will
argue that although territorial licenses of performance copyright (to which category
broadcast licenses belong) have been excepted by the application of the Court's
doctrine of exhaustion, those granting absolute territorial protection, insofar as they
go against the single market imperative, are likely to be a breach of competition law.
The paper then assesses the effectiveness of two copyright directives with a broadcast
ambit in handling the conflict. The Satellite and Cable Directive boldly attempted to
introduce EU wide licensing in relation to 'communication to the public by satellite'.
Not proscriptive of territorial licensing, it was largely ignored by the right holders and
broadcasters who proceeded to emulate territoriality through technical and contractual
means. The ensuing Information Society Directive chose not to support the vision of a
pan-European audiovisual space for broadcasting; it specified that the new
'communication to the public' right, which included a general broadcasting right, was
not exhausted in the European Union, thus condoning a national licensing remit.
A direct challenge to the territorial licensing models is currently before the Court. It
comes from the UK High Court's Article 267 references to the Court, asking it to
address the performance copyright/free movement/Article 101(1) interface in relation
to broadcast licenses of live football rights. Advocate General ("AG") Kokott's
opinion was handed down on the 3r d
February 2011 and the Court's judgment is
expected in October 2011. AG Kokott's opinion has filled the right holders and
commercial broadcasters with apprehension, deeming their territorial licenses to be
both a breach of internal market law as well as competition law. The paper carefully
analyses this opinion against the Court's case law and the import of the directives,
predicting that the Court will follow AG Kokott only in so far as to find that these
territorial broadcast licenses, granting absolute territorial protection, are a breach of
competition law. The Court's judgment will not resolve all open questions. The
parties, aware that a practical solution cannot be achieved through litigation, are
calling for a proper consultation, followed by a legislative solution.
It is significant, therefore, that the gauntlet has now been firmly grasped by the
Commission. On the 13lh
July 2011, the Commission published an Audiovisual Green
2

N14759
Paper,3
following its earlier Communication, 'A Single Market for Intellectual
Property Rights'.4
The Commission now has a legislative strategy for change. It will
submit proposals before the end of 2011 to create a legal framework that will 'enable'
multi-territorial and pan European licensing for collective management of copyright.
More radical and pertinent to audiovisual broadcasting is the Commission's imminent
consultation with a view to the creation of a EU copyright code and an optional EU
copyright title. The audiovisual broadcasting industry is no longer able to stand back
as the Commission's soft law instruments attempt to persuade music collective
societies to alter their territorial licensing strategies. The gauntlet has been thrown
resolutely at this industry's feet.
The audiovisual broadcasting industry may respond to these challenges with the
creation of new licensing models. It is argued that they are best served to do so
outside the influence of a licensing legislative framework, but guided by an adopted
industry-wide code of practice. The Commission should continue to promote,
encourage and reward the uptake of seamless EU wide licensing models. Ultimately it
is a wholesale structural reform, with the creation of an optional EU copyright title,
coexisting with national titles, that is the only effective means of addressing the
territoriality issue and resolving the conflict. This title would create a single market
for copyright goods and services, enhance the security and transparency of EU-wide
audiovisual licensing, and offer all stakeholders the legal certainty that is their due.5
There is no better incentive for the creation of new European broadcasting models.
Audiovisual Green Paper (n 2).
•"Commission Communication. 'A Single Market for Intellectual Property Rights Boosting Creativity and
Innovation to Provide Economic Growth, High Quality Jobs and First Class Products and Services in Europe' (IP
Communication) COM (2011), Brussels 24 May 2011.
'Paul Craig and Grainne de Burca, Ell Law Text. Cases and Materials (4th ed OUP 2008) 551.
3

N14759
2. THE TERRITORIALITY OF COPYRIGHT
Copyright, although described as an intellectual 'property right1
,6
and therefore
expected to give absolute dominion, operates as an exclusionary right: it prevents all
parties other than the copyright owner, or those given permission by the copyright
owner by way of assignment or license, from exploiting the work7
. This exclusivity is
limited to certain categories of 'work1
recognized by the national laws,8
capable of
coexisting in a single subject matter. It also arises automatically without the need for
formality or registration (or indeed the encumbrance of associated costs).9
As long as the principle of territoriality remains undisputed in the European Union,
copyright is limited to the territorial boundaries of the Member States where the right
is granted. This territoriality principle is arguably derived from the Berne Convention
("Berne"). Ricketson and Ginsberg claim that it is implicit in the formulation of
Article 5(2) Berne,10
as this article anticipates that the law of the territory on which
the alleged infringement occurs will determine most questions regarding the existence
of protection, its scope, and the available remedies. They argue that a territorial
interpretation of Article 5(2) has the advantage of maintaining consistency with the
rule of national treatment in Article 5(1)," as well as respecting national sovereignty
in defining the contours of each national copyright market.12
The potential complexity
6
CDPA 1988 s. 1, and other 'copyright1
systems.
7
Lionel Bentley & Brad Sherman, Intellectual Property Lav,' {3rd
ed OUP 2009) 278. It is not a traditional
monopoly right against independent creation, like patents.
8
In the UK these are restricted to eight categories of work, displaying less flexibility than the continental system
which favours an open list approach to subject matter.
9
Berne Convention for the Protection of Literary and Artistic Works 1886 (BC Paris Act 1971) (Berne) art 5(2).
Priority is determined by reference to rules as to first in time and bone fide purchase: Bentley and Sherman (n 7)
263.
1 0
ibid art 5(2): "The extent of protection, as well as the means of redress afforded to the author to protect his
rights, shall be governed exclusively by the laws of the country where protection is claimed".
" Berne (9) art. 5(1): "Authors shall enjoy, in respect of works for which they are protected under this Convention,
in countries of the Union other than the country of origin, the rights which their respective laws do now or may
hereafter grant to nationals, as well as the rights specially granted by this Convention".
u
Sam Ricketson and Jane C. Ginsberg, International Copyright and Neighbouring Rights, the Berne Convention
andBeyondo 2 (OUP 2006) 20.11, 20.32.

N14759
and inefficiency of a territorial interpretation is acknowledged.13
Territoriality is also an obligation under TRIPS, incorporating Article 5 Berne as one
of its basic standards.14
Furthermore given the obligation under the European
Economic Agreement (EEA) for Member states to adhere to these international
treaties,15
it may even be described as a 'quasi-acquis'.16
The Commission has
consistently embraced territoriality;17
in its Lagardere ruling the Court has expressly
confirmed the territorial nature of copyright. The primacy of territoriality is now
also visible in Article 8 of the Rome II Regulation on the law applicable to non-
contractual obligations. The Regulation provides that infringements of intellectual
property rights are exclusively governed on the basis of'Lex loci protectionis'.19
In the commercial world, this combination of copyright's qualities has made it easier
for right holders to define and split up markets along national boundaries by granting
exclusive territorial licenses. There is however no legal necessity for the ambit of
territorial licenses to be national: just as a right holder can enjoy a bundle of national
copyrights (a separate copyright in each of the 27 member states in the EU),2 0
so the
1 3
Several proposals have tried to counter this inefficiency, amongst these Professor Dinwoodie's 'localization sub-
rule' allowing the application of a single law to a world-wide dispute by designating a single point as a 'relevant
place' without nominally departing from territoriality: Graeme B Dinwoodie, Conflicts and International
Copyright Litigation: The role of International Norms' in Jurgen Basedow, Josef Drexl, Annette Kur and Axel
Metzgeb (eds) Intellectual Proper!}' and ihe Conflict of Laws (Mohr Siebeck 2005) 195 (Dinwoodie).
1 4
Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) [1994] 11 EIPR pi, art 9.1 under which
members are obliged to comply with the substantive provisions of Berne, arts 1- 21 and the Appendix thereto.
1 5
Under the terms of accession Member States must become party to a number of international intellectual
property treaties, including Berne. Whilst the norms of intellectual property treaties are as such not part of
community law, it is settled case law that community legislation must, in so far as possible, be interpreted in a
manner which is consistent with international law. See Case C-341/95 Gianni Beiiaii v Safety Hi-Tech Sri. [1988]
ECR 1-1998 4355.
1 6
Bemt Hugenholtz, 'The Last Frontier: Territoriality' in M van Eechaud and others (eds), Harmonizing European
Copyrighl Law The Challenges of Better Lawmaking (Kluwer Law International 2009) 309 (Hugenholtz). The
Acquis Communitaire consists of the harmonized EU rights in the Directives.
1 7
European Commission Green Paper 'On the Establishment of the Common Market for Broadcasting Especially
by Satellite and Cable' COM (84) 300 final, Brussels 14 June 1984 300.
1 8
Case C-192/04 Lagardere Active Broadcast v SPRE and GVL [2005] ECR 1-7199, para 46 (Lagardere).
1 9
Regulation (EC) 864/2007 of the European Parliament and of the Council of 11 July 2007 On the Law
Applicable to Non-Contractual Obligations [2007] OJ L199/40, an 8.
i 0
Commission Communication, 'Follow-Up to the Green Paper on Copyright and Related Rights in the
5

N14759
licensee can be granted a bundle of national licenses extending over several states, or
even throughout Europe. It is only for the right holder to choose, and hence define,
the territorial scope of the license.
3. THE TERRITORIALITY OF BROADCAST LICENSES
In the area of commercial broadcasting of audiovisual content the choice, and the
accepted industry practice, is for broadcast licenses to be national rather than multi-
territorial or EU wide.21
In this section I explore reasons for this. I illustrate that
territorial exclusivity delivers very significant benefits for the right holders and
broadcasters alike, and if revenue is reinvested in technology and content, for
consumers too.22
1 make particular reference to sports broadcasting, as this is pertinent
to the FAPL cases currently before the Court. I also consider the proposition that
national/regional licensing is maintained as a commercial response to predominantly
national geographic markets for audiovisual content, reflecting the cultural and
linguistic diversity within the EU.
3.1 The Benefits of Territorial Licensing
The Commission recognises that "territorialisation is a way to maximize revenue".*3
Indeed in the arena of sports broadcasting, the sale of territorially exclusive rights is a
way of ensuring the maximum short-term profitability of the sporting events for the
right holders (sports organisers).24
In its market investigation of the Pay TV sector,
OFCOM, having reviewed a number of key sports contracts across a range of sports,
acknowledged that the strategy of selling rights on a territorial, fixed fee, and cross
Informalion Society' Brussels 20 November 1996, 23.
2 1
Audiovisual Green Paper (n 2) 3.
2 2
2 3
Commission Communication, 'A Reflection Document of DG INFSO and DG MARKT on Creative Content in
a European Digital Single Market: Challenges for the Future" (Reflection Document) Brussels 22 October 2009,
13.
2 4
A M Wachtmeister, 'Broadcasting of Sports Events and Competition Law' [1998] Competition Policy
Newsletter 1998 number 2, s. III. It was common practice for football rights to be sold in a single bundle to a
single TV broadcaster per territory.
6

N14759
technology basis was optimal for the right holder.25
It recognised that non-exclusive
licensing could lead to fierce downstream competition potentially driving prices down
to a very low level.26
The financial rewards of this territorial licensing strategy are
notable. For example since the Premier League27
decided to assign live UK
broadcasting rights exclusively to BSkyB in the UK in 1992, it has the highest
revenue of any football league, and the fourth highest of any sports league world-
wide.
For broadcasters too, exclusive territorial licensing is a means of maximizing return
on investment, and an opportunity to increase value through sublicensing. It enables
the broadcasters to distinguish their content offering from those of competitors, thus
enhancing their ability to generate further revenue.30
The broadcasting rights in
football events such as the UEFA Champions League or the Premier League, for
example, creates a particular brand image for the broadcasting channel, which then
allows the broadcaster to reach an audience at the consumer level that cannot be
reached by other types of programming.31
Broadcasters are prepared to pay a
premium to acquire this exclusive branding.32
They consider that the sport event only
2 5
See generally OFCOM, 'Pay TV Market Investigation Consultation Document' 18 December 2007
www.ofcom.org.uk/consult/condocs/market_invest_paytv/ (OFCOM).
2 6
Ibid s. 5.87.
2 7
The Premier League (PL) is the leading professional league competition for football clubs in England. The
FAPL is the vehicle through which the 20 PL clubs operate the competition, each club owning one share in FAPL.
FAPL owns all the clubs' intellectual property rights and arranges for licensing of these to broadcasters.
2 8
The value of the package has risen from £191.5 million in 1992 to £1.623 billion in 2009 and £1.82 billion for
the current license until 2012. After an intervention by the European Commission no bidder is allowed to own
more that 5 of the 6 live rights packages: Commission Decision of 22 March 2006 Relating to a Proceeding
Pursuant to Art 81(1) of the EC Treaty (COMP/C.2/38.173) Joint Selling of Media Rights to the FA Premier
League [2006].
2 9
Vrooman John, 'Theory of the Perfect Game: Competitive Balance in Monopoly Sports Leagues" [2009]
www.vanderbilt.edu/econ/faculty/Vrooman/vrooman-rio-sports-special.pdf. Accessed 2nd August 2011.
3 0
Response of the British Sky Broadcasting Group to the European Commission's Public Consultation on
"Creative Content in a European Digital Single Market; Challenges for the Future" (BSkyB), s. 2.4.1.
3 1
Commission Decision of 23 July 2003 relating to a proceeding pursuant to Art 81(1) of the EC Treaty and
Article 53 of the EEA Agreement (COMP/C.2-37.398) joint selling of the commercial rights of the UEFA
Champions League [2003] OJ L291/25. (UEFA ) s.4.1.31.
3 2
Ibid para 70. Football rights exceed all other prices including events such as Formula One. Football accounted
for the single highest proportion of TV sports expenditure.
7

N14759
has value when it is held exclusively by one broadcaster.33
Right holders and broadcasters maintain that there are significant benefits for the
consumer too. The higher returns derived from territorial exclusivity enable
broadcasters to increase their level of investment in innovations in content distribution
(HDTV, VoD), and in value-added services (electronic programme guides, interactive
TV and digital video recorders), as well as new content, rendering the latter more
diverse and innovative.34
In sport, maximising the value of the rights also enables the
right holders to enhance the quality of the competition, as well as to provide financial
support for grassroots sports and sport related projects.35
Territorial licensing arguably
also promotes market efficiency.36
3. 2 The National/Regional Ambit of Broadcast Licenses
Territorial broadcast licenses were originally necessitated by technological and
political limitations to cross border broadcasting. The Member States were the only
entities able to plough considerable investments in nation-wide infrastructures,
required to enable radio waves and TV signals to be relayed across an entire national
territory, and hence to engage in broadcasting activities.37
Today, of the wide range of
broadcasting distribution platforms available within the EU, only Cable and IPTV are
limited by the reach of their physical wire network, and thus have a national or
regional coverage. DTH, due to the reach of the satellite footprint, has a pan European
3 3
UEFA (n 31) para 93.
3 4
BSkyB (n 30) para 2.1: "We invest in attractive content, products and services because that is what our
customers want, and we know that satisfying our customers is the only path to sustainable commercial success".
3 5
Football Association Premier League v QC Leisure [2008] EWHC 1411, para 20: "it has recently been
announced that the FAPL will give the football league a solidarity package to be worth potentially in excess of £90
million...which will go towards youth development community grassroots projects" (Mr. Weingarten in-house
solicitor at FAPL).
3 6
Hugenholtz (n 16) 310. It is allocatively efficient as it allows the right holders to perfectly price discriminate by
charging each and every customer the maximum they are willing to pay for the goods/service, and thus makes it
possible for some poorer consumers, who were previously unable to afford the goods, to purchase them (Ramsey
Pricing Principle).
3 7
See generally Antonio Capobianco, Licensing of Music Rights: Media Convergence, Technological
Developments and EC Competition Law' (2004) 26(3) EIPR 113; RBB Economics and Value Partners, 'The
Benefits of Territorial Exclusivity in the European Audio Visual Industry' London February 2009 (RBB).

N14759
38
coverage and the internet platform is potentially world wide. Furthermore, increased
convergence of technologies enabling content to be distributed between platforms
means that consumers increasingly expect to be able to watch 'anything, anywhere
anytime'.39
In contrast audiovisual broadcasting models remain predominantly
national or regional, with conditional access, and geo-blocking technologies used to
limit reception to the licensed territory.
Right holders and broadcasters submit that their licensing strategy is a commercial
response to consumer demand, claiming that there can be no roll out of multi-
territorial services without a significant demand, and a strong prospect of a successful
return on investment.40
Indeed, a number of the Commission's competition decisions
demonstrate that the geographic markets for audiovisual content remain national -
with upstream broadcasting markets reflecting downstream geographic markets - or at
least confined to linguistic regions41
It is argued that the national/regional
broadcasting markets reflect the cultural diversity of Europe with its resultant diverse
languages, consumer content tastes, the Member States' market sizes, industry
development and consumer purchasing power.42
The geographical scope of the
broadcasters' services is also driven by the geographical scope of interests for
advertisers.43
However whilst the remit of the audiovisual broadcasting licenses remain
national/regional they come into conflict with, and remain a barrier to, the EU's
objective of establishing an internal market.44
3
' Direct to Home Satellite (DTH): RBB ibid s.2.2.2.
3 9
Audovisual Green Paper (n 2) s. 1.1.
4 0
Response of the Association of Commercial Television to the European Commission's Public Consultation on
"Creative Content in a European Digital Single Market; Challenges for the Future" (ACT) 12.
UEFA (no 30) s.4.2.1; European Commission (2006) Joint selling of the media rights to the German Bundesliga
[2006] OJ L 134, para 19 (first Commission decision pursuant to Article 9 of Regulation 1/2003); FAPL Comp
case (no 27) para 23.
4 2
KEA, 'Multi-territory and Audiovisual works in the European Union. Final Report. Prepared for the European
Commission, DG Information Society and Media' October 2010, p 3 (KEA Report).
4 3
RBB (n37) 16.
4 4
As set out in Article 3(3) of the Treaty of the European Union "TEU" (as amended by the Treaty of Lisbon).
9

N14759
4. THE CONFLICT WITH THE SINGLE MARKET OBJECTIVE
In this section I will examine how the Commission and the Court have addressed the
conflict between territorial licenses and the EU's objective of single market
integration as implemented by the provisions of the Treaty of the Functioning of the
European Union ("TFEU").45
The examination of the decisions and cases in this
section provides an important background, as well as a contrast to the treatment of
broadcast copyright licenses by the Commission and the Court as examined in section
5.1 of the paper. It is also pertinent to a critical review of AG Kokott's opinion in
relation to FAPL's exclusive broadcast licenses of live football in section 7.1.1.
4.1 Territorial Licenses and the Free Movement of Goods
The provision on the free movement of goods Article 34 TFEU states: "Quantitative
restrictions on imports and all measures having equivalent effect shall be prohibited
between Member States". The EU, accepting that the protection of national IPRs
justifies restrictions on the free movement of goods, provides for derogation in Article
36 TFEU, for inter alia "the protection of industrial and commercial property".
However, there is a "sting in the tail".46
The derogation is subject to the proviso that
the restrictions are not to constitute a means of arbitrary discrimination or a disguised
restriction on trade between Member States.
In a series of cases beginning in 1970, the Court developed the distinction that it had
drawn between the 'existence' and 'exercise' of intellectual property rights,47
also in
4 5
These general stipulations are, Article 34 for the free movement of goods and Article 56 for the freedom to
provide services, on the one hand, and Articles 101(1) and 101(2) on the European Union's competition law, on
the other. See generally Stefan Enchelmaier, 'Intellectual Property, the Internal Market and Competition Law' in
Josef Drexl (ed), Research Handbook in Intellectual Property and Competition Law (Edward Elgar 2008) 405:
4 6
Valentine Korah, An Introductory Guide to EC Competition Law and Practice (9lh
edn, Hart 2009) (Korah) s.
10.3
4 7
See Joined Cases 56 and 58/64 Etablissements SaRL Consten and Grundig Verkaufs GmbH v Commission
[1966] ECR 299 (Consten and Grundig) 345, where the Court held that although intellectual property rights
CiPRs") are guaranteed by Article 345 TFEU, "This Treaty shall in no way prejudice the rules in Member States
governing the system of property ownership," a distinction could be made between their 'existence' and their
10

N14759
relation to the rules of the free movement of goods. In its first case dealing with the
interface of IPRs and the free movement rules (albeit relating to patents), the Court
held that Article 36 permits derogations only in so far as is necessary for preserving
the 'specific subject matter' of the intellectual property right;48
anything else would
go further than required. In the first copyright case, Deutsche Grammophon
Gesellschafi mbH v Metro SB,4 9
the Court, assuming that the term 'industrial and
commercial property' in Article 36 applied to copyright,50
did not define the specific
subject matter of copyright. It held however that this did not include the right to use
copyright to stop the marketing of the goods in Germany (if these goods had been
distributed in another Member State), as this would "legitimize the isolation of
national markets and would be repugnant to the essential purpose of the Treaty, which
is to unite national markets into a single market".51
In Phil Collins v Imtrat the Court
held that the 'specific subject matter' of copyright lay in its commercial exploitation:
"copyright and related rights are also economic rights in that they confer the right to
exploit commercially the marketing of the protected work, particularly in the form of
licenses granted in return for payment of royalty".52
In Musik-Vertrieb membran GmbH and K-tel International v G£M4,53
the Court
confirmed that the expression 'commercial property' in Article 36 included the
protection conferred by copyright especially when exploited commercially in the form
of licenses.54
It shunned the arguments put forward by the Belgian and Italian
Governments that in the absence of harmonization in this sector the principle of
territoriality of copyright laws always prevailed over the principle of freedom of
movement of goods within the common market. Following Deutsche Grammophon
'exercise'. Only the latter could be limited to the extent necessary to give effect to the prohibitions under Article
101(1).
Case 15/74 Cemra/arm v Sterling Drug [1974] ECR 1147. The Court uses this expression synonymously with
'existence' Case 238/87 Volvo v Erik Veng UK [1988] ECR 6211.
Case 78/70 [1971] ECR 487 (Deutsche Grammophon)
5 0
ibid para 1 I.
5 1
Deutche Grammophon (no 49) para 12.
5 2
Joined cases C-92/92 and C326/92 [1993] ECR 1-5145 para 20.
5 3
Joined cases 55/80 and 57/80 [1981] ECR 147 (GEMA).
5 4
Ibid para 9.
11

N14759
the Court held that the copyright owner was prohibited from using his copyright to
stop the resale, import or export of any goods (sound recordings in this instance) that
were placed on the market by him or with his consent. The intra community
distribution copyright in the goods was thus 'exhausted'.55
These cases demonstrate how the Court developed the (appropriated)56
'doctrine of
exhaustion' as a tool to mitigate the territoriality of copyright in relation to the
distribution of goods within the EU. This is now codified in several Community
directives concerning copyright.57
4.2 Territorial Licenses and Article 101(1)
Equally effective have been the remedies in EU competition law against the exercise
of intellectual property rights along national borders. Article 101(1) prohibits all
agreements having as their object or effect the prevention, restriction or distortion of
competition. Whilst the objective of Article 101(1) as a whole is to "protect
competition on the market as a means of enhancing consumer welfare and of ensuring
an efficient allocation of resources", it is argued that in addition it serves to promote
market integration independently of efficiency consequences59
and even prevails
over/trumps such efficiency.60
The Commission and the Court, eager to prevent
agreements that might thwart the single market project, have used Article 101(1) to
fetter exclusive territorial licenses and in particular those species of license granting
absolute territorial protection.
•5
G£M4(no 53) para 15.
S 6
Arguably from both the German Reichsgencht who developed this notion in the early years of the 20,h
century,
and applied it to all intellectual property rights, and the US's "first sale doctrine': Trevor Cook, Exhaustion - A
Casualty of the Borderless Digital Era in Lionel Bentley and Others (eds), Global Copyrighl; Three Hundred
Years Since ihe Statute of Ann (Edward Elgar 2009) 357-366 (Cook).
"7
Directive 2001/29/EC, Information Society Directive (no 136) art 4(2); Directive 2006/115/EC on the Rental
and Lending Right and on Certain Rights Related to Copyright in the Field of Intellectual Property (codified
version) art 9(2); Directive 91/250/EEC on the Legal Protection of Computer Programs art 4(c). See generally
Christopher Stothers, Parallel Trade in Europe Intellectual Property Competition and Regulatory Law (Hart 2007)
40-44.
5 8
Guidelines on the Application of Article 81(3) of the Treaty (2004/C 101/08) 13.
" Okeoghene Odudu, Boundaries of EC Competition Law, The Scope ofArticle 81 (OUP 2007) 19-21 (Odudu).
6 0
Richard Whish, Competition Law (6lh
edn OUP 2009) (Whish) 23.
12

N14759
4.2.1 Exclusive Territorial Licenses
Exclusive territoriality first came to the attention of the Commission and the Court in
the 1960s in the case of Consten and Grundig,61
albeit in the form of a trade mark
license which had been used as a mechanism to create 'absolute territorial
protection'62
for the distributor/licensee. Both the Commission and the Court found
that the agreement was a breach of Article 101(1), with the Court having no doubt
that exclusive territorial agreements, export bans and the abuse of the Grundig's
'Gint' trade mark,63
resulted in an isolation of national markets:
"The Treaty whose preamble and content aim at abolishing the barriers
between states, and which in several provisions gives evidence of a stem
attitude with regard to their reappearance, could not allow undertakings to
reconstruct such barriers. Article 85(1) is designed to pursue this aim".64
Following Consten and Grundig the Commission, throughout the 1970s, adopted a
hardened, formalistic and interventionist approach to territorial licensing
agreements,65
taking the view that many of these agreements infringed Article 101(1)
and required exemption under Article 101(3).66
The Court did not endorse such a
strict approach to territorial exclusivity per se. In the Nungesser Case,67
concerning
plant breeder's rights, the Court drew the pertinent distinction between a so-called
'open' exclusive license (which does no more than prevent the licensor from licensing
others in the territory, and from itself exploiting the subject-matter of the rights in the
6 1
Consten & Grundig (n 47).
^ Although the Commission objected to prohibitions on parallel imports in earlier decisions, it first used the term
'absolute territorial protection' in Re Agreement of Grundig Verkaufs Gmbh [1964] 3 CMLR 489, 504
6 3
Consten and Grundig (n 47) 343.
6 4
Consten and Grundig (n 47) 340 (emphasis added).
6 5
Alison Jones and Brenda Sufrin. EU Competition Law 719 (4lh
edn OUP 2011) (Jones and Sufrin).
6 6
Re the Agreements of Davidson Rubber (72/237/EEC) OJ LI43/31, [1972] CMLR D52; AOIP v. Beyrard
(76/29/EEC) OJ L6/8, [1976] 1 CMLR D14: Here the Commission was prepared to grant an exemption to an
export prohibition applicable to the first sale provided the prohibition was limited in time and economically
justified; Nungesser v Commission {Maize Seed case) (258/788) OJ L286/23, [ 1978] 3CMLR 434.
"Case 258/78 LC Nungesser KG v EC Commission [ 1983] 1 CMLR 278 (Nungesser).
13

N14759
territory) and a 'closed' exclusive license (containing export bans, where absolute
territorial protection is intended to be achieved on the territory by the exclusion of
* 68
parallel imports). Then, in an important development in community law, the Court
held that some territorial exclusivity does not necessarily infringe Article 101(1). If
the exclusivity provisions are necessary to induce the licensee to enter into the
transaction, competition was not restricted.69
Some 'open' exclusive licenses were
therefore not a breach of competition law. It is argued that Nungesser is an example
of the Court's willingness to examine licenses in their economic context. The Court
takes into consideration the effects of dynamic competition under Article 101 (1). It
accepts that some restriction of static competition may be outweighed by the positive
effects that the clauses giving territorial protection, have on dynamic competition.70
4.2.2 Exclusive Territorial Licenses Granting Absolute Territorial Protection
Absolute territorial protection however, remained outside the radar of the Court's
economic approach; it was not willing to take any efficiency into consideration if an
agreement clearly harmed the creation of the single market.71
In Nungesser the
exclusive territorial license was a 'closed' one i.e. supported by a ban on intra brand
exports, including a clause in the contract whereby the licensees promised to "do
everything in their power to prevent the export" of seeds to Germany.72
Referring to
its decision in Consten and Grundig, the Court condemned these restrictions outright:
"The Court has consistently held that absolute territorial protection granted to a
licensee in order to enable parallel imports to be controlled and prevented, results in
the artificial maintenance of separate national markets, contrary to the treaty".75
Furthermore, licenses granting absolute territorial protection did not pass the
'indispensability' hurdle of Article 101(3) and were therefore not exempted under this
6S
[bid para 53. Open exclusive licenses was a new concept not previously developed in the case law or literature.
m
hlungeser (n 67) para 57.
70
Olav Kolstad, 'Competition Law and Intellectual Property Rights - Outline of an Economics-Based Approach'
in Josef Drexl (ed). Research Handbook in Intellectual Property and Competition Law (Edward Elgar 2008) 15.
7 1
Ibid 15.
7 2
Nungesser (n 67) para 64.
7 3
Nungesser (n 67) para 61.
14

N14759
Article.14
However in the case of Erauw-Jacquery SprL v La Hesbignonne Sociele Cooperative
the Court held that an export ban in a license for basic seeds protected by plant
breeder's rights fell outside Article 101(1). It is generally accepted that the nature of
the product was crucial to the Court's finding. Basic seed (as compared with certified
seed used in Nungesser) was more akin to a manufacturing process and only retained
its intellectual property registered protection if its integrity was maintained. Indeed
both the Commission and the Advocate General Mischo held that an export ban of
this kind arose from the 'existence' of a plant breeders right and was not an improper
'exercise' of it. 7 5
The principles derived from this decision appear to have been
confined to plant breeders' rights in basic seed.76
At this juncture it may appear that the conflict between the exploitation of IPRs and
the single market imperative has been resolved in favour of the single market. The
Court's doctrine of exhaustion renders ineffectual territorial distribution licenses in
goods, and competition law restrains territorial IP licenses granting absolute territorial
protection. However, right holders and commercial broadcasters point to the Court's
settled case law in relation to performance copyright in support of their contention
that in relation to broadcast licenses, the conflict has been resolved in their favour.
They claim that this therefore legitimises their territorial strategy. In the next section I
critically examine this proposition.
5. GREATER LENIENCY FOR PERFORMANCE COPYRIGHT LICENSES?
The Coditel cases, Coditel I'' and Coditel II,10
are the seminal cases quoted in support
7 4
Nungesser (n 67) paras 77,78.
7 5
Case 27/87 [ 1988] ECR 1919,4 CMLR 172; 576, para 9.
'"'SicasovQJ [1999] L4/27; Valentine Korah, Intellectual Property Rights and Competition Rules {Han 2006) 34.
7 7
SA Compagnie Generate pour la Diffusion de la Television, Coditel SA v Cine Vog Films SA (case 62/79) [ 1980]
ECR 881 (Coditel I).
7 8
Coditel SAv Cine Vog Films SA (case 262/81) [1983] C.M.L.R.49 (Coditel II).
15

N14759
of the view that "Performance copyright",79
copyright in the exhibition of films,
broadcasts and other performing rights, has been treated far more favorably by the
ftfl ft I
Court, both in relation to its internal market rules as well as competition law.
These cases concerned three Belgian cable companies (Coditel) that picked up
transmissions of a film from Germany and relayed it to clients in parts of Belgium.
The exclusive licensee of film rights in Belgium, Cine Vog, objected on the basis that
the broadcast had jeopardised the commercial future of the film in Belgium and sued
Coditel in copyright infringement.83
Coditel appealed on the grounds that Cine Vog's
exclusive territorial license was inconsistent with the freedom to provide services,
within the meaning of Article 56 TFEU, and competition law Article 101(1) TFEU.
The Belgian Court of Appeal referred the case to the Court for a preliminary ruling on
the interpretation of Article 56 TFEU.
5.1 Performance Copyright and the Free Movement Rules
In Coditel I the Court addressed the problem of whether Article 56 prohibited a
territorial license "in view of the fact that a series of such [licenses] might result in the
partitioning of the common market as regards the undertaking of economic activity in
the film industry."84
The Court having accepted that broadcast performance rights were subject to Treaty
rules for the provision of services, artfully implied something like the Article 36
derogation into these rules relating to services, even though the text of the Treaty
contains no hint of a clash between the freedom to provide services and IPRs, nor of
85
the resolution of such conflict. The Court held that the copyright owner and his
licensees had a legitimate interest to require a fee for any 'actual or probable'
^ Performance copyright is used as an umbrella term in academic literature.
w
Korah (n 46) s.10.4.2.
8 1
Korah (n 46) 370.
8 2
The Film was broadcast in Germany by a German television station with the authorisation of the French
proprietor.
8 3
Coditel I (n 77) para 5.
M
Coditel 1 (n 77) para II.
8 5
Korah (n 46) 344.
16

N14759
showing of a film, as well as to authorise a television broadcast of a film only after it
has been exhibited in cinemas for a certain period of time. This was because "a
cinematographic film belongs to the category of literary and artistic works made
ft 7
available to the public by performances which may be infmitely repeated". It held
that this was part of the 'essential function' of "this type" of copyright and that
territorial licenses must be understood and examined in this context.
Furthermore the exercise of these licenses did not create artificial barriers to trade
between Member States as:
"the mere fact that those geographical limits may coincide with national
frontiers does not point to a different solution in a situation where television is
organized in the Member States largely on the basis of legal broadcasting
monopolies, which indicates that a limitation other than geographical field of
application of an assignment is often impracticable".89
The Court therefore ruled that the exclusive territorial licensee, Cine Vog, could rely
on its Belgian Performance copyright to restrain Coditel "without thereby infringing
Community law".90
In Coditel I the Court chose not to extend its doctrine of exhaustion to Performance
copyright. It is interesting to examine how it employed an evolved 'essential function'
test91
in order to determine that the exercise of Performance copyright should be
allowed to partition the single market. The Court took account of the extant
commercial realities of the film industry in so doing: (i) the industry practice of
11
In the Cine Vog contract the film could not be shown on TV until 40 months after its first showing in the
cinemas.
6 7
8 8
This has been generally interpreted in the academic literature to include broadcasting copyright: Korah (n 46)
344.
8 9
9 0
1)1
Stefan Enchelmaier, 'Intellectual property, the Internal Market and Competition Law' in Josef Drexl (ed).
Research Handbook on Intellectual Property and Competition Law (Edward Elgar 2008) 412.
17

N14759
exploiting rights both temporally (windows of exploitation)92
as well as territorially
and (ii) the existence of broadcasting monopolies maintaining national upstream
geographic markets. While the earlier 'specific subject matter1
test in relation to
copyright sets out what the owners of copyright are allowed to do based on these
rights (the right to exploit commercially),93
the 'essential function1
test sets out the
economic or other policy reasons why the legal system allows them to do so.
Performance copyright is meant to afford the right holder an 'adequate share1
in the
fruits of the commercial exploitation of his creation.94
In Coditel I the Court
acknowledged that the right holder's commercial return could be seriously impaired if
the film was shown at an earlier stage on television in Belgium. In the case of Warner
Brothers v Christiansen95
the Court applied this same reasoning to determine that the
sale of videotape did not exhaust the right to control its rental (of physical copies) for
commercial purposes. The price paid by the purchaser for the videotape bore no
adequate relation to the benefits that could be reaped by renting out the tape if this
intention was not known at the time of the sale. Korah has welcomed the Court's
recognition of the need for an adequate investment return in relation to Performance
copyright. She acknowledged however that this was a departure from the Court's
earlier case law in relation to other IPRs. In Merck v Stephar, (a patent case) for
example, the Court had not been concerned with the 'adequacy' of Merck's reward
when it prevented Merck from using its Dutch patent to protect its monopoly profit in
Holland, on the basis that Merck must take the consequences of its conduct in selling
the product in Italy (where there were no possibility of earning such profit).96
Korah
has cautioned that the market must be left to determine the level of remuneration.97
9 2
The commercial practice by which producers and distributors maximize revenue by staggering the media
platform through which the film is marketed: Audiovisual Green Paper (n 2) 9.
9 3
Phil Collins v Imtrat (n 52). The Court has ruled on the scope of the 'specific subject matter' in relation to
various types of IPRs. See Stothers (n 57) 27-134.
M
See Korah (n46) 10.4.2.
9 5
Case 158/86 Warner Brothers v Christiansen [1988] ECR 2605, paras 14-16; Directive 2006/115/EC. the EC
Rental and Lending Directive of the 12 December 2006 OJL 376/28 now makes it clear that there is no exhaustion
in relation to rental and lending, 'see n 57'.
* (187/80) [1981] ECR 2063.
Q 7
Korah (n 46) 345.

N14759
In the 1989 case of Ministere Public v Jean-Louis Tournier, the Court applied its
Coditel decision. In this case two copyright 'works' coexisted in the same subject
matter (sound recordings): a 'distribution right' in the material sound recordings, and
a 'public performance right' in the musical work embodied in the sound recording.
The Court, acknowledging this duality," followed GEMA in holding that there was an
exhaustion of 'distribution rights' in France in the material sound recordings. This
was a result of first sale of those sound recordings in another Member State (so that a
levy could not be charged on their importation into France).100
However the Court
followed Coditel 1 in holding that there was no exhaustion of 'public performance
rights' in the same sound recordings.101
The Court considered that:
"The problems in relation to the requirements of the Treaty, involved in the
observance of musical works made available to the public through their performance
are not the same as those which arise when the act of making a work available to the
public is inseparable from the circulation of the physical medium on which it is
recorded. In the former case the copyright owner and the persons claiming from him
have a legitimate interest in calculating the fees due in respect of the authorization to
present the work on the basis of the actual or probable number of performances, as
the court held in Case 62/79 Coditel v Cine Vog Films (1980) ECR 881"./ 0 2
These cases attest to the extraordinary flexibility of the exhaustion doctrine.103
In
relation to Performance copyright the Court decided not to use it as policy lever to
facilitate the single market, as it had done for copyright in physical goods. The
decision therefore enabled copyright owners to continue to license their rights on a
territorial basis. These licenses, however, still fell within the domain of competition
law for further scrutiny, as examined in the next section.
9 8
Case 395/87 [1989] ECR 2521 (Ministere Public).
9 9
Ibid para 13.
1 0 0
Ministere Public (n 98) para II; 'see GEMA (n 53)'
1 0 1
Ministere Public <n 98) para 13.
1 0 2
Ministere Public (n 98) para 12 (emphasis added).
1 0 3
Cook (n 56) 359.
19

N14759
5.2 Performance Copyright and Article 101(1)
In Coditel II, the Court considered the applicability of Article 101(1) to the same
exclusive territorial license of Performance copyright. The Court held that an
exclusive exhibition license is not of itself prohibited by Article 101(1), in the light of
the commercial practice in the film industry and the need for a film producer to obtain
an adequate return. The Court, however, did not rule out the possibility that in certain
circumstances the exercise of exclusive territoriality may fall within Article 101(1).
The Court stated that it was for the national courts to establish whether such exercise
created barriers that were artificial and unjustifiable in terms of the needs of the
cinematographic industry, or whether they led to the possibility of charging excessive
fees, or whether the duration of the exclusivity was disproportionate.104
The Court has
not yet had the opportunity to apply its own criteria.105
Both Mr Justice Barling106
and
Mr Justice Kitchin1 0 7
in the FAPL cases before the UK High Court have held that the
scope of Coditel II is narrow, restricted to the impact of Article 101(1) on the "mere"
grant of an exclusive performance license for the territory of a Member State.
5.2.1 Performance Copyright Licenses Granting Absolute Territorial Protection
In Coditel II the Court was ruling on an 'open,' rather than a 'closed' contractual
license of Performance copyright; there was no imposition of contractual absolute
territorial protection. Indeed, AG Reischl, drawing a direct comparison with the
Nungesser case, acknowledged that the justification for the Coditel license was the
same as that for the 'open' license in the Nungesser case: the producer of the film
would not find a licensee for the task (the new film requiring heavy expenditure
m
Coditel II (n 78) para 19 of the Court's Judgement.
1 0 5
The Commission has taken action in relation to copyright licenses on a number of occasions. A solution,
applying Article 101(3), has been to shorten the duration of such licenses. See Film Purchases by German
Television Staiions OJ [1989] L284/3; See UEFA and German Bundesliga decisions (n 30).
1 0 6
The Football Association Premier League Limited v QC Leisure and Others [2008] EWHC 44 (Ch) (Barling J)
para 38 (refusing summary judgment or a stay).
1 0 7
Vie Football Association Premier League Limited v QC Leisure [2008] EWHC 1411 (Ch) (Kitchin J) paras
349. 360.
20

N14759
advertising and synchronization) unless the licensee was granted an exclusive right of
exhibition. 0
It was instead the Court's refusal in Coditel I to extend the doctrine of
exhaustion to Performance copyright that resulted in de facto 'absolute territorial
protection' for Cine Vog, the territorial licensee. This was recognised by AG Reischl:
"Indeed it must be borne in mind that as far as television is concerned - this effect
(the exclusion of parallel imports) was accepted, in view of the specific subject matter
of copyright in a film, in the first Coditel judgement"/09
Coditel II thus establishes
that some 'open' territorial licenses of broadcasting rights are acceptable, subject to
an effects analysis. It is, however, silent on 'closed' licenses110
and therefore arguably
does not sanction this species of license.
The Commission's recent analysis in its CISAC decision"1
supports the above
interpretation of the Court's case law. This decision relates, inter alia, to the territorial
exclusivity clause contained in the parallel contracts of 17 EEA collecting societies,
by which one collecting society authorises another to administer its music repertoire
in a given territory on an exclusive basis. First following Coditel //, the Commission
acknowledged that the granting of an exclusive license limited to a certain territory is
not automatically restrictive of competition, but that one must look at the manner in
which the exclusive right conferred by the license is exercised. Then following
Nungesser, it held that before it may be concluded whether such restriction of
competition is caught by Article 101(1), it is necessary to consider whether the
licensing between collecting societies would be likely to occur in the absence of the
contractual restraints in question. The restraint is not caught by Article 101 (1), if it is
objectively necessary for the existence of such licensing.112
The Commission found
that there was no objective justification for the territorial exclusivity preventing a
collecting society from offering licenses to commercial users outside a given territory
1 0 8
Coditel 11 (n 78) Opinion of Advocate General Reischl 3412 para (d)(bb).
1 0 9
Coditel II (n 78) Opinion of Advocate General Reischl 3413 para (dXcc).
1 1 0
Barling J (n 106) para 39.
1 , 1
Commission Decision of 16 July 2008 relating to a proceeding under Article 81 EC and article 53 of the EEA
Agreement (Case COMP/C2/38.698) OJ C 323/12 (CISAC). The Commission adopted a formal decision under Art
7 of Regulation 1/2003 [2003] OJ LI/1 against 24 collecting societies for musical performance rights in the EEA.
"" Ibid para 115; Communication from the Commission, 'Guidelines on the Application of Article 81(3) of the
Treaty' (2204/C 101/08) para 18(2).
21
7

N14759
(the clause granting absolute territorial protection). This was a breach of Article
101(1), as it restricted competition among the collecting societies and forced users to
deal with a monopoly provider in each territory.113
The Commission has ordered
twenty four collecting societies to bring the concerted practice of territorial
delineation to an end, and to renegotiate their agreements regarding the management
of online, satellite and cable transmission rights. Twenty two of the twenty four
collecting societies have appealed the decision before the General Court."4
In conclusion of this section, whereas the Court's ruling in relation to the 'non-
exhaustion' of Performance copyright sanctioned territorial broadcast licenses in
general {Coditel I), these remained subject to the scrutiny of competition law. 1
contend that the species of territorial license granting absolute territorial protection,
the 'closed' licenses, have not been excepted by the Court's decision in Coditel II,
and may therefore be found to constitute a breach of Article 101(1): they threaten the
single market imperative. Any broadcasting strategy that condones this type of
licensing is therefore contentious.
6. THE COPYRIGHT HARMONIZING DIRECTIVES WITH A BROADCAST
AMBIT
In this section I will assess the effectiveness of the two copyright harmonizing
directives115
with a broadcasting ambit in dealing with the conflict: the Satellite and
Cable Directive and the Information Society Directive.
1 1 5
CISAC (n 111) paras 200 and 223.
1 1 4
The President of the General Court has rejected applications for interim measures made by a number of
applicants.
1 1 5
The seven existing harmonizing directives are largely based on the ELTs mandate to establish a single market
for goods and services: Hugenholtz (n 16) 322.
22

N14759
6.1 The Satellite and Cable Directive116
In 1993 the Commission, responding to the deployment of new technologies
facilitating Satellite and Cable transmission across boundaries, and in an attempt to
address the uncertainty of the application of the Bogsch Theory to this cross border
transmission117
(now supported by the Coditel I decision),"8
proposed a 'bold'
structural legislative solution in the Satellite and Cable Directive."9
It provided for an
exclusive right to authorize 'communication to the public by satellite'120
and defined
this notion at a community level.121
The Directive also Tocalised' this satellite
broadcasting right to the Member State of signal uplink.122
This definitional technique and legal fiction123
confined rather than rejected the
territorial approach by removing the other EU countries of receipt as countries where
communication took place, and therefore where protection could possibly be
sought.124
The impetus of the Satellite and Cable Directive's approach was to simplify
and thereby facilitate rights clearing by the satellite transmitter.125
However its remit
was broader; in keeping with the logic of the internal market, it implied that there
'should' only be one licensing for the circulation of the same satellite broadcast,126
U b
See generally Silke von Lewinski and Michel M Walter (eds), European Copyrighl Law, (OUP 2010) 7.0.1-
7.8.1 (Lewinski and Walter).
1 1 7
This theory necessitated the concurrent application of all national laws within the satellite footprint to a single
act of satellite broadcasting.
1 1 8
"Following the ruling in Coditel there is no way in which Copyright restrictions on intra-community
broadcasting can be progressively abolished": European Commision Green Paper. 'Television without Frontiers'
COM (84) 300 final Brussels 14,h
June 1984 325.
"')
Council Directive 93/83/EEC of 27 September 1993 on the Coordination of Certain Rules Concerning
Copyright and Rights Related to Copyright Applicable to Satellite Broadcasting and Cable Retransmission. OJ
1993 L 248/15 (SatCab).
1 2 0
Ibid art 2. The Directive left open the relationship between the satellite broadcasting right, and the general
broadcasting right and other rights of public communication: Lewinski and Walter (n 116) s. 7.26.
1 2 1
SatCab (n 119)rec 14.
1 2 2
Satcab(n 119) art l(2)(b).
1 2 3
Jaime Espantaleon. Exhaustion light in European Television EIPR 2010, 32(1) 29-42 (Espantaleon) 12.
1 2 4
See Dinwoodie (n 13).
1 2 5
SatCab (n ll9)recs 5-7 and 13-5.
1 2 6
Espantaleon (122) 44.
23

N14759
and thus attempted to create a pan European audiovisual space for satellite
broadcasting127
to prevent market fragmentation along national borders.128
Some legal commentators have suggested that, following this Directive, the
exclusivity of the satellite broadcast could no longer be achieved by granting rights
'in rem1
but only 'in personam'.129
The Directive's effect was therefore indirectly to
set up a limited exhaustion principle, an "exhaustion light" for satellite
broadcasting.130
However the Directive did not actually prohibit territorial licensing: it
acknowledged that the principle of contractual freedom made it possible for right
holders to continue to limit the exploitation of their rights.131
Indeed territoriality is
arguably implicit in the Directive's specification that encrypted signals can be
considered to be receivable if the means for decrypting the broadcast has been
provided to the public by the broadcaster. The Commission has subsequently
emphasized that this provision1 3 2
did not lessen the scope of the transfer of rights for
the entire footprint: whether transmission is unscrambled or encrypted, the footprint
can serve as the basis for exploiting the rights.
The Satellite and Cable Directive was a brave and forward looking, but a largely
failed attempt, at de-territorialising the right of broadcasting by satellite, even on the
Commission's own critical evaluation.133
In its 2002 report the Commission
acknowledged that the right holders simply ignored or circumvented the Directive's
ground rules by emulating territoriality through contractual and technical means. It
held that as a result market fragmentation that existed prior to the Directive's adoption
1 2 7
SatCab (n ll9)rec 12.
1 2 8
SatCab (n ll9)rec 14.
1 2 9
Lewinski and Walter (n 116) 7.1.17.
, 3 0
Espantaleon (n 123)44.
1 3 1
SatCab (n 119) rec 15.
I 3 i
SaiCab (n 119) art l(2)(c); Report from the European Commission on the application of Council Directive
93/83/EEC on the Coordination of Certain Rules Concerning Copyright and Rights Related to Copyright
Applicable to Satellite Broadcasting and Cable Retransmission COM (2002) 430 final, Brussels 26 July 2002
(2002 Report) 8.
Hugenholtz (n 16)314.
24

N14759
continued.134
6.2 The Information Society Directive
By the next wave of copyright harmonization the focus had shifted to the problem of
copyright's territoriality in the online environment.135
The Information Society
Directive136
chose not to support the Satellite and Cable Directive's vision of an
audiovisual space for broadcasting. This Directive may have been an opportunity for
the Commission to push 'exhaustion light' to its limit, by banishing territoriality
altogether for satellite broadcasts and indeed for all online communication. However
the Commission's consultation exercise, as documented in the Information Society
Green Paper137
and the Follow up to the Green Paper,138
revealed that the 'interested
parties' were firmly against the extension of exhaustion: "they took the view that any
legislative initiative should spell out explicitly that the right applicable to online
services may not be subject to exhaustion".139
The Information Society Directive therefore took a firm policy decision, in line with
the Court's jurisprudence, the dominant opinion in the Member States, and in
response to the lobbying from the right holders and broadcasters,140
not to extend
1 3 4
2002 Report (132) 7.
1 3 5
The emergence of the internet brought a new urgency to the harmonization process, and in finally in 2001 the
Commission responded with the most comprehensive horizontal harmonization directive in the field of Copyright
and Related rights to date. The important objective of this directive was for the EC to implement the obligations
that it undertook with the WIPO •internet treaties'; the WIPO Copyright Treaty (WCT) and the WIPO
Performances and phonograms Treaty (WPPT). Both Treaties were signed by the Commission on behalf of the
EU, thereby taking on a commitment to implement the new international norms in a harmonized fashion.
1 3 6
Council Directive 2001/29/EC of 22 May 2001 On the Hannonization of Certain Aspects of Copyright and
Related Rights in the Information Society [2011] OJ L167/I7, (Information Society Directive).
1 3 7
European Commission Green Paper on 'Copyright And Related Rights In The Information Society'
(Information Society Green Paper) COM (95) 382 final, Brussels 19 July 1995.
1 3 8
Communication from the Commission to the European Parliament, the Council, The European Economic and
Social Committee and the Committee of the Regions, 'Follow-up to the Green Paper on Copyright and Related
Rights in the Information Society' COM (96) 568 final. Brussels 20 November 1996.
1 3 9
Ibid 18-19.
1 4 0
The public input from the interested parties consisted of almost 2/3 of organizations that represent right holders
with the music and film industries the most heavily represented: Mireille van Eechaud and others (eds),
Harmonizing European Copyrighl Law The Challenges of Better Lawmaking (Kluwer Law International 2009) 27
25

N14759
exhaustion to the newly defined authorial right141
of'communication to the public' in
Article 3(1). Article 3(3) states that "the rights referred to in paragraphs (1)... shall
not be exhausted by any act of communication to the public..".142
The 'broadcast' right is included in Article 3(l):, 4 3
"Member states shall provide
authors with the exclusive right to authorise or prohibit any communication to the
public of their works, by wire or wireless means [...]". Although 'broadcast' is not
deployed as a separate term in Article 3(1), as it is in the Rental Right Directive,144
recital 23 specifies that "This right should cover any such transmission or
retransmission of a work to the public by wire or wireless means, including
broadcasting." Therefore by virtue of Article 3(3), this wider broadcast right145
is not
exhausted in the EU. The consequences of this are that any commercial user wishing
to broadcast audiovisual content throughout the EU has to seek authorisation from
each right holder in the individual member states.
In contrast, it is widely accepted that Article 3(1) does not extend to the 'public
performance right' i.e. the right of performance, recital or display.146
This is because
Article 3 closely follows Article 8 of the WIPO Copyright Treaty, which only covers
all forms of communication to the public characterized by a distance element.147
Furthermore, recital 23 of the Information Society Directive specifies that, "This right
[the author's right of communication to the public] should be understood in a broad
sense, covering all communication to the public not present at the place where the
communication originates [....]." Therefore the 'public performance' right, unlike the
(van Eechaud).
1 4 1
Article 3(1) concerns the rights of authors whereas article 3(2) relates to. inter alia, broadcasting organisations.
, 4 i
Article 3(3) also extends to the 'making available right', the consideration of which is outside the remit of the
dissertation.
1 4 3
Lewinski and Walter (n 1 16) ss. 11.3.22 and 11.3.26.
1 4 4
Directive 2006/115/EC article 8(1); van Eechaud (140) 83.
1 4 5
Article 3(1) broadened the broadcasting by satellite right to include any type of broadcast, for example via
cable or webcast: van Eechaud (140) 83.
1 4 6
Not to be confused with the umbrella term 'Performance Copyright' employed by academics and Ihe subject of
the Coditel 1 decision (n 77).
1 4 7
W7PO Copyright Treaty COM (97) 628, article 3, para 1. The two provisions have almost identical wording.
See generally Ansgar Ohly, 'Economic Rights' in Estelle Derclaye (ed), Research Handbook on the Future of EU
Copyright (Edward Elgar 2008) 212, 226.
26

N14759
'broadcast' right, does not receive the blessing of the 'non-exhaustion' provision of
Article 3(3). I argue, however, that this right is deemed not to be subject to the
doctrine of exhaustion, by virtue of its categorization as a service, and the application
of recital 29 of the Information Society Directive to services: "The question of
exhaustion does not arise in the case of services, and on line services in particular." It
is accepted that the objective of a rule of secondary EU law, such as a directive, may
be inferred from its recitals, which are required by the Treaty and present an
important means for interpretation, while they are not part of the operative rules.148
Where does this leave the influence of the Satellite and Cable Directive's 'exhaustion
light' on broadcast licenses, insofar as the Information Society Directive now
advocates a territorial clearance of rights? The Commission's Reflection Document
recognises that the Satellite Directive remains unmodemised, having ignored calls for
its reform by the European Parliament in 2004, and acknowledges, "its current impact
remains unclear". It is not unreasonable to deduce that the Court too, in its reluctance
to rely on this directive, in cases that could have been subsumed therein such as
Lagardere,149
Egeda150
and the Rafael Hoieles cases, all dealing with Satellite
broadcasts, is recognising this directive's increased impotence.151
In conclusion of this section, these harmonizing directives were ineffectual in
resolving the conflict, because whilst the Satellite and Cable Directive attempted to
introduce EU wide licenses, its thrust was undermined by the Information Society
Directive's codification of the 'non exhaustion' of broadcast copyright, condoning a
national licensing remit. With no resolution or clarity emanating from the Court, nor
the Commission's harmonising directives, it is not surprising that taking commercial
decisions in this area of interface of copyright and the internal market is considered to
be a very uncertain business.15
'
1 4 8
Lewinski and Walter (n 116) 1.0.48
1 4 9
Legardere(n 18).
, 5 n
EGEDA v Hoasa (C-293/98) [2000] ECR I -629.
'•1
SGAE v Rafael Hoteles SA (C-306/05) [2006] ECR I -11519 para 30. See generally Espantaleon (123).
1 5 2
Fred Houwen and Richard Neville, "Risky Business: Current Challenges in the Relalionship between
Competition Law and Copyright' [2009] Comp. L.J. 8(1) 18-36.
27

N14759
7. NEW CHALLENGES TO THE TERRITORIALITY OF BROADCASTING
LICENSING
7.1 A challenge from the UK High Court
A direct and timely challenge has now come to these Satellite broadcasting business
models from the UK High Court. It concerns the broadcasting of Premier League (PL)
live football matches in the UK through the unauthorised use of foreign decoder
cards. FAPL licenses the rights to broadcast live PL football matches on a territorial
basis. Broadcasts are made by encrypted signals via satellite, and paying customers
receive the broadcasts by use of a decoder card (enabling reception of the encrypted
broadcast anywhere within the footprint of the broadcast). FAPL's territorial licenses
contain contractual obligation on the foreign licensees to prevent the decoder cards
from being used outside the licensed territory.153
The cases, Football Association
Premier League Ltd v QC Leisure154
and Karen Murphy v Media Services Ltd1 5 5
were
brought by FAPL against the suppliers of non-UK decoders, and landlords of pubs
showing the unauthorised live broadcasts. FAPL claim that these activities undermine
the exclusivity, and hence the value, of its rights resulting in a serious loss of revenue
both to the FAPL and broadcasters.156
The defendants claim that FAPL's actions
amount to a restriction of freedom to provide services and a restriction of
competition.157
The High Court in each case referred a number of questions to the Court for a
preliminary ruling under Article 267 TFEU, including whether the FAPL's exclusive
copyright broadcasting licenses are: (i) contrary to the free movement rules of the
Treaty and (ii) constitute a breach of Competition Law, Article 101(1). The Court
ordered that the cases be joined. The judgment of the Court, expected in October
2011, is eagerly awaited in the hope that it will afford greater clarity. A G Kokott's
1 5 3
EWHC 1411 (Ch). referred as case C-403/08 [2008] OJ C301/19 (Kitchen J) Para 337.
, M
EWHC 1411 (Ch). referred as case C-403/08 [2008] OJ C301/19 (Kitchen J) (QC Leisure).
1 5 5
EWHC 1666 (admin) referred as case C-429/08 [2008] OJ C301/26 (Burton LJ and Barling J).
1 5 6
QC Leisure (n 154)9.
1 5 7
Contrary to Articles 56 and 101(1 )TFEU respectively.
1 5 8
A total of 18 questions from both cases.
28

N14759
opinion was delivered on the 3rd
February 2011.159
7.1.1 Analysis of Advocate General Kokott's opinion
In this section I will describe, and then critically analyse, AG Kokott's opinion
against the examined case law and the remit of the Directives studied earlier. AG
Kokott provides a controversial, emotive and value laden opinion on the legitimacy of
FAPL's territorial broadcast licenses. The underlying tenet of her opinion comes very
early at paragraph 4 of the opinion: "Measures to enforce exclusive broadcasting
rights are at odds with the principle of the internal market. It is for that reason
necessary to examine whether such measures infringe the European Union's
fundamental freedoms or its competition law".
7.1.1.1 FAPL licenses and the Fundamental Freedoms360
AG Kokott decides to deal with the FAPL restrictions on the export of decoder cards,
used to decrypt the satellite broadcasts, as a restriction of a freedom to provide
services.161
She acknowledges that although decoders are goods, they constitute "the
key" to the UK access to the Greek broadcast, and that therefore the freedom to
provide services is the prominent freedom engaged.162
Then arguably flying in the
face of: the Court's decisions in Coditel I and Ministere Public;1 6 3
recital 29 of the
Information Society Directive which specifies: "The question of exhaustion does not
arise in the case of services..";164
and provisions in the copyright directives firmly
limiting the exhaustion of copyright to the physical distribution right,165
AG Kokott
declares that she is "surprised" by FAPL's contention that, "in the field of the
1 5 9
Joined cases C - 403/08 and C-429/08 Football Association Premier League Ltd and Others v QC Leisure and
Others and Karen Murphy v Media protection Services Ltd [201 I ], Opinion of AG Kokott (Opinion).
1 6 0
Ibid Section D paras 165-242, addressing questions 6 and 7 in Case C-429/08 and questions 7 and 8(b) and (c)
in case C-404/08.
1 6 1
Opinion (n 159) 1-44 para 170.
1 6 2
1 6 3
'Seen 77 and n 99'.
, w
'See s. 6.2'
I M
'See n 57'; see also the Reflection Document (n 22) 11.
29

N14759
provision of services there is no exhaustion compatible to the movement of goods".166
AG Kokkot asserts that, on the contrary, "restrictions on the fundamental freedoms
must, as a rule, be justified by reference to the same principles."167
On this basis, the
Advocate General proceeds to examine the FAPL license restrictions within the scope
of the case law on exhaustion of rights to goods. It is submitted that the Advocate
General omits to acknowledge that, as in the Ministere Public case, the Treaty
principles can be interpreted differently in relation to goods and services, even where
different copyright 'works' subsist in the same physical good.
AG Kokott accepting that the copyright 'work' at issue is that of 'broadcast'
copyright,169
chooses the 'specific subject matter' test, rather than the 'essential
function' test employed in Coditel J, in order to establish whether this broadcast
copyright is exhausted. The Advocate General, paying heed to Collins v Imtrat, states
that the specific subject matter of the broadcast right lies in its "commercial
exploitation". AG Kokott states that the broadcast of football matches is
commercially exploited through a charge for the decoder cards. FAPL receives
payment for the Greek decoder cards used in the UK without permission, albeit at
Greek prices rather than UK prices (Greek prices are significantly lower than UK
prices). FAPL is therefore not deprived of a commercial return on its
investment.1 7 0
AG Kokott distinguishes this factual situation from that of Coditel I
where the right owners did not receive payment for the unauthorized transmission of
the film on the Belgian cable network. AG Kokott then declares that "a partitioning of
the internal market for the reception of satellite broadcasts is not necessary in order to
protect the specific subject matter of the rights to live football transmissions".171
The
Advocate General concludes that the broadcast copyright is therefore exhausted, with
the consequence that FAPL's territorial broadcast licenses are unenforceable.
1 6 6
Opinion(n 159) 1-47 para 182, 183.
1 6 7
Opinion (n 159) 1-47 para 183 (emphasis added).
l r t 8
Opinion (n 159) 1-48 para 192. 'Sees. 4.1'
] M
Opinion (n 159) para 190.
1 7 0
171
Opinion (n 159) para 200; in line with the Court's jurisprudence in relation to the free movement of goods and
in particular Deutsche Grammophon (n 49).
30

N14759
I submit that AG Kokkot's line of reasoning departs from the Court's case law in
relation to Performance copyright.172
I propose to demonstrate this by applying the
legal principles derived from this same case law to the facts of the FAPL case. The
Court in Coditel I employs its evolved 'essential function' test, rather than the
'specific subject matter test. On this basis:
1. It is first necessary to take into account the economic realities of the particular
act in issue. In Coditel I the Court recognised and accepted the commercial
practice within the film industry of maximising revenue by staggering the
media platform through which the film is marketed (windows of
exploitation).173
AG Kokott however, in relation to the FAPL licenses, does
not accept the practice within Pay TV sports broadcasting of Ramsey Pricing,
stating that there is "no specific right to charge different prices for a work in
each member state".174
2. It is then necessary to address, as the Court did in Coditel I in relation to
Performance copyright, whether FAPL has been afforded an 'adequate share
in the fruits of its commercial exploitation' i.e. whether the payment for the
decoder cards in Greece (for the broadcast in the UK) constitutes an
'adequate' investment return. In Coditel I and Ministere Public, the Court held
that the copyright owner has a right to a separate license fee in each member
state in which it has copyright for its broadcasts.175
AG Kokott however does
not appear to be concerned with the 'adequacy' of FAPL's return. She
arguably reverts to the Court's jurisprudence in Merck v Stephar, in
suggesting that FAPL should not be allowed to use its UK broadcasting
copyright to protect its monopoly profit in the UK, once it has received a
payment in Greece for the decoder cards. AG Kokott points out that FAPL do
have the choice to restrict the marketing of their decoders to the UK.1 7 6
'See s. 5.1 of the Paper".172
173 . c
n A
17
"'' 'See section 5.1 of the paper1
.
1 7 6
31

N14759
3. Finally one must ask, as the Court did in Coditel I, whether FAPL, in
exercising its Performance copyright, is creating artificial barriers between the
Member States. In Coditel I, the Court concluded that territorial film licenses
did not constitute 'artificial' barriers in the light of the state broadcasting
monopolies existing at the time.177
In the absence of the same technological
and political limitations to cross border broadcasting today, do territorial
broadcast licenses constitute such artificial barriers? It is arguable, as the right
holders and broadcasters claim, that they do not, as they reflect the geographic
markets for audiovisual content. Indeed pertinent to FAPL's case are the
Commision's competition decisions in relation to the collective selling of live
football rights. These demonstrate, as previously illustrated, that the
geographic markets for such rights are national or confined to linguistic
regions. AG Kokott however believes that territorial licensing does create such
artificial barriers: "the partitioning of the internal market for live football
transmission is precisely not intended to protect any form of exploitation of
the transmitted football match". The Advocate General however does not
offer any explanations for this assertion.
I contend that the Court will have to reverse itself on Coditel I if it wishes to follow
AG Kokott and extend the doctrine of exhaustion to broadcast copyright. Ultimately
this will be a policy decision for the Court to take.
Some academics argue that the Court will not follow AG Kokott, in the light of the
Information Society Directive's codification of 'non-exhaustion' of the broadcast
right and other services.179
Indeed the Commission in its Reflection Document states:
"only legislation can change the state of the law." AG Kokott argues however that
the particular broadcasting act in issue in the FAPL cases, that is, the Tive satellite
l 7 7
Codite]I(n 77).
1 7 8
l 7 9
At the 'International Conference on European Copyrighl Law: Towards a European Copyright Code', the legal
academics in this field gathered there deemed that AG Kokott's position on exhaustion of the broadcasting right
could not be maintained in the light of the provisions in the harmonising directives in relation to exhaustion .
www.iuriscom.net/documents/conf20110415.pdf (14th August 2011).
, 8 0
Reflection Document (n 23) 11.
32

N14759
broadcast at a commercial premises via a single TV screen', does not fall within the
general 'communication to the public' right in Article 3(1) of the Information Society
Directive. It hence does not receive the blessing of this directive's 'non-exhaustion'
1 O 1
policy by virtue of Article 3(3). I submit that even if AG Kokott's disputed claim is
accepted, it is possible to argue the FAPL's live satellite broadcast is exhausted by
virtue of its categorization as service, " and the application of recital 29 of the
Information Society Directive to services, as illustrated in section 6.2 of this paper.
7.1.1.2 FAPL licenses and Competition law'83
In response to the referring courts' questions184
AG Kokott states that it is not
necessary under Article 101(1) to examine the effects of an agreement in order to
establish its anti-competitive 'object',185
but that regard must be had to the content of
its provisions, the objectives that it seeks to attain and the legal and economic context
of which it forms a part. In relation to the latter, FAPL had argued before the High
Court that the defendants had not provided adequate evidence to support the full legal
and economic contextual analysis of the case.187
AG Kokott reiterates the Court's
settled case law that "agreements aimed at partitioning national markets according to
national borders, or making the interpenetration of national markets more difficult, in
particular those aimed at preventing or restricting parallel exports" are agreements
that have the 'object' of restricting competition and are hence a breach of Article
1 8 1
AG Kokott considers that the live broadcast of the PL match in pubs falls within Article 11 bis (i){iii) of Beme
(n 9) ie is a communication to the public present at the place where the communication originates, because in her
eyes the communication originates on the TV screen: Opinion <n 159) para 144. Lewinski and Walters submit that
although the public is gathered in the same place, the signals themselves originate from elsewhere: 'See (n 115) s.
11.3.26'; See also Enrico Bonadio, 'Communication to the Public in FAPL v QC Leisure and Murphy Media
Protection Services: the Advocate General 's Opinion' Jul of Intellectual Property law and Practice Volume 6,
Issue 6,370-371.
1 8 2
Council Directive 89/552/EEC of 3 October 1989, recitals: "Whereas television broadcasting constitutes in
normal circumstances a service within the meaning of the Treaty".
1 8 3
Opinion (n 159) paras 243-251.
1 8 4
Question 10 in Case C-403/08 and Question 8 in Case C-429/08.
I8
- Case C-8/08 T-Mobite Netherland and Others [2009] ECR 1-4529 para 30.
1 8 6
Joined cases C-501/06P, C-5I3/06P, C-515/06 and C-5I9/06P GlaxoSmithKline Services limited v
Commission [2009] ECR 1-9291, para 58.
1 8 7
QC Leisure (n 107) para 363
33

N14759
101(1). Further economic analysis is thus not required under Article 101(1) where the
1 SS
single market imperative is threatened. She holds that FAPL's series of
broadcasting exclusive licenses, which contain a contractual obligation requiring the
broadcaster to prevent its satellite decoders from being used outside the licensed
territory, have the same effect as agreements to prevent or restrict parallel exports.
These licenses confer 'absolute territorial protection' and are thus incompatible with
the internal market. They hence constitute an 'object' breach of Article 101(1) and
there is no need to demonstrate actual anti-competitive effects.
I submit that it is likely that the Court will follow AG Kokott in relation to her
analysis under Article 101(1). I concur with AG Kokott that the FAPL exclusive
territorial licenses are 'closed' licenses, granting absolute territorial protection and
forcing users to deal with monopoly providers in each territory. The Court will
therefore be able to distinguish itself from its decision in Coditel II where, as argued,
the licenses were 'open' licenses. Therefore in line with its settled case law"" and the
more recent GlaxoSmithkline case, the Court will find that the FAPL series of parallel
licenses, in frustrating the "Treaty's objectives of achieving the integration of the
national markets through the establishment of a single market"190
are object breaches
of article 101(1). As Whish and Bailey comment, "The Glaxo litigation reveals that,
for the purposes of Article 101(1), the sacred cow of single market integration and the
protection of parallel trade is alive and kicking".191
AG Kokott has acknowledged that it is always open for FAPL to defend its licenses
under Article 101(3) (the burden being upon FAPL to produce convincing
evidence).192
Although this Paper is not the forum to discuss the complexities of the
Article 101(3) defence, it is submitted that it is unlikely that 'closed' licenses granting
absolute territorial protection will fulfil the indispensability requirement of this
1 8 8
GlaxoSmithKline (n 186) para 61
189
Consten and Grundig (n 47); Nungesser (n 67)
1 9 0
GlaxoSmithKline (nl86) para 61.
1 9 1
Richard Whish and David Bailey, 'Regulation 330/2010: The Commission's New Block Exemption for
Vertical Agreements' [2010]47CML Rev. 1757, 1761.
, 9 :
Article 101(1) 2 of Regulation 1/2003.
34

N14759
article.193
Restrictions are not considered to be indispensible if the efficiencies
specific to the agreement can be achieved by other practicable and less restrictive
means.194
Indeed, AG Kokott suggests that, "...restricting the commentary to certain
language versions might create a sufficiently effective practical delimitation of the
markets in order to continue to serve the different national markets at different
prices".195
In conclusion of this section, if the Court follows AG Kokott and finds an exhaustion
of broadcasting copyright, FAPL's licenses will not be enforceable, nor indeed will
any other territorial broadcasting licenses - only EU wide licenses will be. The
beneficiaries of this freedom are economic operators outside the commercial
organization (in the wider sense) of the licensor, the parallel traders. It would be a
death knell for territorial licensing. A judgment by the Court that confirms a breach of
competition law only affects the parties to the licensing agreements. Subject to
exception under Article 101(3), the licenses would be void and unenforceable but can
be renegotiated. Territorial broadcast licensing will be curtailed but not killed off.
In a statement following AG Kokott's opinion the Premier League has urged: "If the
European Commission want to create a pan European licensing model for sports, film
and music, then it must go through the proper consultative and legislative process to
change the law rather than attempting to force through legislative changes through the
courts."196
7.2 A Challenge from the Commission's 'Soft Law1
The Commission appears to have heeded this call for legislative reform. Following
the ineffectuality of the Satellite and Cable Directive to stem territoriality and
encourage the uptake of pan European broadcasting licenses, the Commission has
m
See Article 101(3) Guidelines [2004] OJ C101/97, para 74.
1 9 4
Jones and Sufrin (n 65) 250.
1 9 5
Opinion (n 159) 1-50 para 202 (emphasis added).
1 9 6
Khurram Aziz. 'Premier League cannot block pubs from showing football says AG' [2011] Intellectual
Property Magazine www.jntellectualpropertv.com/ipwo/doc/view .
35

N14759
chosen to offer solutions via a variety of soft law instruments.197
The Commission
shifted its focus to the needs ofa new generation of Europe-wide/intemational online
providers and webcasters, emerging as a result of the development and convergence
of web based and online broadcasting platforms. Their need is for a licensing policy
that is in line with the ubiquity of an online service; one that will offer them lower
transactions costs, and stronger legal enforcement than the extant national licenses.
The Commission's 2005 Recommendation advocated multi-territorial online
licenses, but this was deemed by the European Parliament not to be applicable outside
the realm of online music licenses, and therefore to audiovisual licenses.199
The
Commission's ensuing 2008 Communication200
and its 2009 Reflection Document,201
both of which had an audiovisual broadcast remit, were not so circumscribed. In its
Reflection Document the Commission first annunciated its legislative goal. In
addition to recommending the creation of a streamlined pan-European/multi territorial
licensing process, it floated the radical prospect of a 'European copyright law'
established by means of EU Regulation. It recognised that this single copyright title,
having an instant community wide effect, would create a single market for copyright
and would do away with the necessity of administering a bundle of 27 national
copyrights. Significantly if the EU title was construed to take precedence over
national titles, it would remove copyright's inherent territoriality with respect to
applicable national copyright rules. The Reflection Document also entertained an
'optional' copyright title, existing in tandem with national copyright titles.202
The Commission's legislative goal is now supported by a legislative strategy,
1 9 7
Interpretative Green Papers, Communications, Public Consultations, Reflection Documents etc unlike
Directives or Regulations have no legal effect. The court has ruled that national courts must take
Recommendations into account wherever possible.
1 9 8
Commission Recommendation 2005/737/EC of 18lh
October 2005 On Collective Cross Border Management of
Copyright and Related Rights for Legitimate Online Music Services. OJ 2005 L 276/54.
1 9 9
The European Parliament invited the Commission to make it clear that the Recommendation applies
exclusively to online sales of music recording: European Parliament Resolution of the 13Ih
March 2007 OJ
(C30IE)(EC).
2 0 0
Communication from the Commission, 'On Creative Content on Line in the Single Market' COM (2007) 836
final, Brussels 3 January 2008.
i 0 1
Reflection Document (n 23).
2 0 2
Reflection Document (n 23) 16.
36

N14759
specifically in relation to audiovisual broadcasting licenses, as well as a renewed
sense of urgency in implementing this strategy. Its Audiovisual Green Paper followed
hot on the tail of its Communication, 'A Single Market for Intellectual Property
Rights' ("IP Communication")." The IP Communication has the rhetoric of
resolution, "the answer is in the single market", and in relation to copyright, a
solution, in the creation of "enabling legislation",204
as well as a time frame for its
implementation. This includes:
1. the creation of a legal framework for the collective management of copyright
to enable multi-territorial and pan European licensing.205
The Audiovisual
Green Paper suggests that this framework may be important to the clearing of
rights for music incorporated in the audiovisual work and therefore not
applicable to audiovisual licenses generally.206
- The Commission will submit
proposals by the 2nd
half of 2011.
2. The creation of a comprehensive unitary European copyright code that would
encompass a codification of the present body of EU copyright directives.
Neither the IP Communication nor the Audiovisual Green Paper specify
whether this is to be achieved by way of Regulation, but on the basis of the
Reflection Document it is assumed that it is.
3. The creation of an 'optional' European copyright title, existing in tandem with
national titles, on the basis of Article 118 TFEU.2 0 7
The Commission acknowledges that the latter two legislative proposals require further
study and analysis and that therefore it will launch a consultation to examine them in
the context ofa dialogue with stakeholders as part of its Digital Agenda for Europe.
- The Commission will report back in 2012.
2 0 3
Communication from the Commission, 'A Single Market for Intellectual Property Rights Boosting Creativity
and Innovation to Provide Economic Growth, High Quality Jobs and First Class Products and Services in Europe'
COM(2011) provisional Brussels 13 July 2011.
: w
Ibid s.3.3.1.
2 0 5
IP Communication (n 203) 10.
2 0 6
2 0 7
IP Communication (n 203) 11
2 0 8
Commission Communication, 'A Digital Agenda for Europe' COM (2OI0) 245, Brussels 19 May 2001. The
37

N14759
8. THE WAY FORWARD AND CONCLUSION
The paper has demonstrated that there is a need for resolution in the quest for
certainty in the area where copyright meets competition law and the internal market
rules i.e. the territorial licensing of audiovisual content, and that resolution is
beckoning change. There is now arguably the political Zeitgeist for such change with
a challenge for Europe to become the world leader in innovative licensing solutions209
and the Commission's call to arms in its Digital Agenda for Europe, urging Europe to
reassert its digital competitiveness as against the USA and Asia.
In the short-term the change will probably be behavioral i.e. stemming from the
response of the right holders and broadcasters to the Court's ruling. Whilst this paper
is not the forum to second-guess the form that the new commercial licenses will
adopt, a few possible scenarios will be mooted:
1. Licenses can be restricted to those countries in the EU where a significant
return can be ensured, for example to the UK rather than Greece, thus
removing the incentive for parallel imports of lower cost decoders.210
2. Licenses can be directed to distribution platforms where territorial exclusivity
can be afforded greater protection, for example the cable platform where there
is no overspill across territories, or the internet platform where geo-blocking
technology can be utilized to restrict content reception.211
However the current
importance of DTH to the European audiovisual industry, and the influence of
the DTH broadcasters (BSkyB) means that this exclusion is not a short term
option.
3. Licenses can be granted on a pan-European basis, with broadcasters on all
platforms allowed to bid for pan-European rights. This may mean that
dominant broadcasters with first mover advantages and deep enough pockets
Digital Agenda is Europe's strategy for a flourishing digital economy by 2010.
m
IP Communication (n 203) 6
i l 0
AG Kokott acknowledges this option: Opinion (n 159) para 201.
2 1 1
RBB (n 37) s. 5.3. Major sporting events are increasingly available live on the internet.
38

N14759
(BSkyB and NewsCorp) would be in a better position to bid for these rights. It
may result in the warehousing of some rights, or their sublicensing being
restricted to non-competing platforms. It could lead to a migration of some
audiovisual sectors (eg sports broadcasting), towards specialist Europe wide
channels, or more dramatically to a cross border consolidation of the
broadcasting industry.
1 submit that audiovisual pan European licenses should remain voluntary and market
driven. I welcome the Commission's continued recognition that "the business
practices of audiovisual licenses are quite different from those prevailing in the music
sector"212
as, arguably, evidenced by its decision to target, at least initially, its
licensing legislativeframeworkat the music industry.213
This is the case for manifold
reasons, but significantly because audiovisual works are language specific in value.214
The case has been made earlier in this paper that multi-territorial licenses are granted
where there is a business case for them.215
Any legislative intervention that would
remove, from the right holders and broadcasters, the opportunity to recoup
investments through contractual licensing and marketing arrangements, would be
likely to lead to a significant loss of incentive, with a resultant reduction in
investment. The EU should rather continue to promote, support, guide and reward the
establishment of more seamless EU wide licensing structures. It should also help
create a demand for European audiovisual works. There are a number of
comprehensive studies suggesting how this can be achieved.216
In addition the EU
should encourage the adoption of an industry Code of Practice, to be approved by the
Member States' IP offices, in conjunction with the national competition authorities.
This should serve to ensure that new broadcasting licensing models operate in a way
* u
Commission Slaff Working Document, 'Study on a Community Initiative on Cross-Border Collective
Management of Copyright' Brussels 7 July 2005 24.
2 , 3
Press Release IP/11/630, 'Commission sets out "blueprint" for Intellectual Property Rights to boost creativity
and innovation' Bmssels, 24 May 2011.
2 1 4
ACT (n 40)6.
ACT(n 40) 12-13 eg common language channels, diaspora channels.
2 1 6
See generally KEA Report (n 42).
39

Resolving the Conflict Between Copyright and EU Single Market in Audiovisual Licensing

Resolving the Conflict Between Copyright and EU Single Market in Audiovisual Licensing

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (14)

Similar to Resolving the Conflict Between Copyright and EU Single Market in Audiovisual Licensing

Similar to Resolving the Conflict Between Copyright and EU Single Market in Audiovisual Licensing (20)

Resolving the Conflict Between Copyright and EU Single Market in Audiovisual Licensing