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Wednesday, 13 May 2015

BREAKING: CJEU says that distribution right may be infringed just by advertising sale of protected works

Does the distribution right under Article 4(1) of the InfoSoc Directive include the right to offer the original or copies of the work to the public for sale? In other words: does the distribution right encompass also the mere advertising for sale of copyright-protected works or their copies?

This, together with other two questions, is what the Bundesgerichtshof (German Federal Court of Justice) asked [here] our beloved Court of Justice of the European Union (CJEU) to clarify in Dimensione Direct Sales srl and Michele Labianca v Knoll International SpA, C-516/13.

This morning the CJEU issued its 36-paragraph decision, ruling that the right of distribution encompasses the right to prevent "an offer for sale or a targeted advertisement of the original or a copy of that work, even if it is not established that that advertisement gave rise to the purchase of the protected work by an EU buyer, in so far as that advertisement invites consumers of the Member State in which that work is protected by copyright to purchase it."


Knoll International SpA is an Italian company that trades in furniture. Also Dimensione Direct Sales (Mr Labianca is its director) is an Italian company that trades in furniture, which it offers for sale on its website Between 2005 and 2006 Dimensione Labianca offered for sale in Germany items that would infringe copyright in furniture to which Knoll International owns the copyright.

Litigation ensued before German courts, and Knoll succeeded at both first instance and appeal. The case eventually reached the Bundesgerichtshof, that decided to stay the proceedings and seek guidance from the CJEU as to the following:

1) Does the distribution right under Article 4(1) of Directive 2001/29/EC include the right to offer the original or copies of the work to the public for sale?

If the first question is to be answered in the affirmative:

2) Does the right to offer the original or copies of the work to the public for sale include not only contractual offers, but also advertising measures?

3) Is the distribution right infringed even if no purchase of the original or copies of the work takes place on the basis of the offer?

The AG Opinion

In his Opinion [not yet available in English, but summarised here] on 4 December 2014, Advocate General (AG) Cruz Villalón noted that the factual background here differed from the one at stake in Cassina [here, in which the CJEU held that "[t]he concept of distribution to the public, otherwise than through sale, ... applies only where there is a transfer of the ownership of that object."]Titus Donner [here] and Blomqvist [here], in that in this case Dimensione Direct Sales made unequivocally clear its intention to market the alleged infringing furniture, but no sale or actual delivery of infringing goods actually occurred.

The AG advised the Court to rule that Article 4(1) of the InfoSoc Directive must be interpreted in the sense that the right to distribution includes the right of the copyright owner to prevent anyone from offering for sale to the public said original or the copies without his/her consent, provided that such offer displays a clear intention to conclude a contract that would involve the transfer of ownership over the original or the copies of a work. 

OK, but is this also an act of distribution?
Yes, said the CJEU
Today's ruling

The Court began by observing that the notion of ‘distribution’ constitutes an independent concept of EU law. This means that its "interpretation ... cannot be contingent on the legislation applicable to transactions in which a distribution takes place".

By adopting the InfoSoc Directive, among other things the EU intended to implement into the EU legal order the WIPO Copyright Treaty (WCT). As such Article 4(1) of the InfoSoc Directive must be interpreted with regard to Article 6(1) WCT. This means that the notion of ‘distribution to the public ... by sale’ in Article 4(1) of the Directive has the same meaning as the expression ‘making available to the public … through sale’ in Article 6(1) WCT.

In Donner and Blomqvist the Court held that "distribution to the public is characterised by a series of acts going, at the very least, from the conclusion of a contract of sale to the performance thereof by delivery to a member of the public."

Use of the phrase "at the very least" means that:

 "[I]t is not excluded that the acts or steps preceding the conclusion of a contract of sale may also fall within the concept of distribution and be reserved, exclusively, to the holders of copyright.
Although the Court has already held that distribution to the public must be considered proven where a contract of sale and dispatch has been concluded ..., the same is true of an offer of a contract of sale which binds its author. In fact, such an offer constitutes, by its very nature, an act prior to a sale being made.
As regards an invitation to submit an offer, or a non-binding advertisement for a protected object, those also fall under the series of acts taken with the objective of making a sale of that object. Indeed ... a trader who directs his advertising at members of the public residing in a given Member State and creates or makes available to them a specific delivery system and payment method, thereby enabling those members of the public to receive delivery of copies of works protected in that Member State, makes, in the Member State where the delivery takes place, a ‘distribution to the public’ under Article 4(1) of Directive 2001/29."

The Laccio tables,
among the pieces of furniture
subject to the German litigation
As a result,

"There may be an infringement of the exclusive distribution right, under Article 4(1) of [the InfoSoc Directive], where a trader, who does not hold the copyright, sells protected works or copies thereof and addresses an advertisement, through its website, by direct mail or in the press, to consumers located in the territory of the Member State in which those works are protected in order to invite them to purchase it ... [I]t is irrelevant, for a finding of an infringement of the distribution right, that such advertising is not followed by the transfer of ownership of the protected work or a copy thereof to the purchaser."


This new CJEU decision appears to extend greatly the scope of the distribution right. The Court justified this outcome by recalling, among other things, that the InfoSoc Directive intends to provide a high level of protection to authors and [perhaps even more importantly] copyright owners.

One may wonder whether this ruling represents a departure from earlier CJEU case law, notably Cassina. The Court itself addressed this point, and held that:

"although it is true that .... the concept of distribution to the public of the original of a work or a copy thereof .... entails a transfer of the ownership of that object, the fact remains that an infringement of the distribution right can be observed where consumers located in the territory of the Member State in which that work is protected are invited, by targeted advertising, to acquire ownership of the original or a copy of that work." 

A more detailed analysis of this ruling will follow soon. For the time being, a very interesting part of the decision is how the Court stressed that the interpretation of copyright exclusive rights cannot be contingent on the legislation applicable to transactions in which a distribution takes place. 

Thus, one may now wonder, for instance, about the compatibility with EU law of the right of distribution under UK law. Section 18 of the Copyright, Designs and Patents Act 1988 defines it as the right to ‘issue to the public of copies of the work’, this being the ‘the act of putting into circulation’ by or with the consent of the copyright owner copies of works not previously put into circulation. 

One of the leading treatises on UK copyright, Copinger and Skone James on Copyright, states [7.91] that:

"It is clear that the act of offering or exposing copies for sale is not capable of amounting to putting copies into circulation."

But following today’s decision in Labianca, is it still so? How is it possible to reconcile the meaning of ‘issuing’ copies with the idea that now to have an act of distribution issuing copies is not at all required?


Anonymous said...

In the UK, if an act is a primary infringement but an offer to to that act is not, the offer can nonetheless be prevented through a quia timet injunction on the basis that it constitutes a threat to carry out an act of infringement.

Given that background, it is largely irrelevant in the UK whether the act of advertising is a primary infringement or not. So while UK *legislation* may not fully implement this judgment, UK *law* already does.

It would be interesting to know whether quia timet relief is available in Germany; one would assume not, or there would have been no need for a reference.

Anonymous said...

Would this be a case of "justified geoblocking" if DDS prevented German consumers visiting their website in the future to avoid further infringement and further litigation from Knoll?

Thomas Dillon said...

This decision illustrates the problem of judicial legislation without all member states at the table. The possibility of quia timet relief was clearly something that should have been considered. However, why did the Bundesgerichtshof think that it needed to know whether the Directive granted more limited rights than German law?

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