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Tuesday, 30 December 2008

Is STIM a bully? It all depends ...

Earlier this month the Court of Justice of the European Communities ruled on the criteria for establishing validity under European competition law of an allegedly abusive and discriminatory scheme for the licensing of copyright works by a copyright collecting society. This ruling can be found in Case C‑52/07, Kanal 5 Ltd and TV 4 AB v Föreningen Svenska Tonsättares Internationella Musikbyrå (STIM), a decision dated 11 December 2008, in response to a reference for a preliminary ruling from the Marknadsdomstolen (the Swedish Market Court) on February 2007.

In short STIM (the Swedish Performing Rights Society) operated three different methods for charging TV channels to use its members' music in television broadcasts:

* Kanal 5 and TV4 (both private commercial channels) were charged a proportion of their revenue derived from advertising and subscriptions, in relation to the amount of time for which STIM's works were transmitted, the charge being made at the end of each year.

* SVT (a public broadcaster) was charged a proportion of an annual hypothetical revenue sum, the charge being fixed at the beginning of each year and without taking into account the actual duration of broadcasts of STIM's works.

* TV channels that had yet to register any significant turnover were charged a minimal amount, taking into account (i) the actual duration of broadcasts of STIM's music and (ii) the number of viewers.
Kanal 5 and TV4 claimed that STIM was abusing its dominant position under Article 82 of the EC Treaty since STIM's fee model was discriminatory and, in their case, led to excessive charges; the companies also argued that there was insufficient linkage between the cost of STIM's licence and their actual revenues.

The Marknadsdomstolen stayed the proceedings and to refer the following questions to the Court for a preliminary ruling:
‘(1) Is Article 82 EC to be interpreted as meaning that a practice constitutes abuse of a dominant position where a copyright management organisation which has a de facto monopoly position in a Member State applies to or imposes in respect of commercial television channels a remuneration model for the right to make available music in television broadcasts directed at the general public which involves the remuneration being calculated as a proportion of the television channels’ revenue from such television broadcasts by those channels?

(2) Is Article 82 EC to be interpreted as meaning that a practice constitutes abuse of a dominant position where a copyright management organisation which has a de facto monopoly position in a Member State applies to or imposes in respect of commercial television channels a remuneration model for the right to make available music in television broadcasts directed at the general public which involves the remuneration being calculated as a proportion of the television channels’ revenue from such television broadcasts by those channels, where there is no clear link between the revenue and what the copyright management organisation makes available, that is, authorisation to perform copyright-protected music, as is often the case with, for example, news and sports broadcasts and where revenue increases as a result of development of programme charts, investments in technology and customised solutions?

(3) Is the answer to Question A or B [whatever happened to (1) and (2), the IPKat wonders] affected by the fact that it is possible to identify and quantify both the music performed and viewing?

(4) Is the answer to Question A or B affected by the fact that the remuneration model (revenue model) is not applied in a similar manner in respect of a public service company?’
The Court of Justice has given its answer:
"1. Article 82 EC must be interpreted as meaning that a copyright management organisation with a dominant position on a substantial part of the common market does not abuse that position where, with respect to remuneration paid for the television broadcast of musical works protected by copyright, it applies to commercial television channels a remuneration model according to which the amount of the royalties corresponds partly to the revenue of those channels, provided that that part is proportionate overall to the quantity of musical works protected by copyright actually broadcast or likely to be broadcast, unless another method enables the use of those works and the audience to be identified more precisely without however resulting in a disproportionate increase in the costs incurred for the management of contracts and the supervision of the use of those works.

2. Article 82 EC must be interpreted as meaning that, by calculating the royalties with respect to remuneration paid for the broadcast of musical works protected by copyright in a different manner according to whether the companies concerned are commercial companies or public service undertakings, a copyright management organisation is likely to exploit in an abusive manner its dominant position within the meaning of that article if it applies with respect to those companies dissimilar conditions to equivalent services and if it places them as a result at a competitive disadvantage, unless such a practice may be objectively justified".
In other words, the IPKat says, never mind the principle -- just focus on the detail. Licence revenue based on the licensee's income is not an abuse except where it is, while discriminatory charging is an abuse except where it isn't. The reality is that abusive licensing is determined by looking at (i) proportionality, (ii) the licensor's administrative convenience and (iii) objective justification. Merpel says, there are still some interesting questions for the Swedish court to ponder as to the nature of the market(s) in which TV channels operate. In one sense they all compete with one another for the viewer's attention, while in another they do not (eg a sports channel is hardly substitutable for a diet of soap operas or nature programmes). It will presumably be necessary to assess this issue as a preliminary to determining whether discriminatory licence terms can be justified.

IPKat note on the Advocate General's Opinion -- which is now available in fifteen EU official languages, including Maltese, but not English -- here
See what's on Swedish TV here
All the Swedish TV channels here

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