One copyright to rule them all?

All intellectual property rights have a limited territorial scope. This can make it difficult to determine if an IP right is infringed, particularly when the contested use takes place online. The German Supreme Court recently dealt with the question of the commercial effect of two websites which were primarily directed at Kazakhstan and Ukraine.

Background

The plaintiff produces clothing and owns the copyright to photographs of such clothing. The German-based defendant used to hold a licensee to these photographs but terminated the license agreement.

Subsequently, the plaintiff noticed that its photographs were displayed in a Google picture search. The pictures were linked to two of the defendant’s websites, which were accessible under the top-level domains .kz (for Kazakhstan) and .ua (for Ukraine). The photographs from the Google picture search were not displayed on these websites. The website’s text was in Cyrillic except for the article description and an error massage stating that the product pictures could not be displayed, which were in German.

The plaintiff made a test purchase and the goods were shipped from Germany to Kazakhstan.

The plaintiff sued the defendant before the District Court of Hamburg arguing that the display of its photographs on Google constituted copyright infringement. The (prior) publication of those pictures by the defendant on its websites allowed the Google picture crawler to find and publish the photographs.

The District Court dismissed the action. The appeal to the Higher Regional Court of Hamburg was unsuccessful. The plaintiff appealed further to the German Supreme Court.

The German Supreme Court’s decision

The German Supreme Court dismissed the appeal.

The judges briefly confirmed that German courts had jurisdiction to hear the case because the defendant was based in Germany (Art. 4(1), Art. 63(1) Brussels I recast). German law had to be applied by virtue of Art. 8(1) Rome II Regulation.

The decisive question was if copyright infringement required a commercial effect of the contested use in Germany and if such a commercial effect existed in the present case.

The judges referred to the Court’s consistent case law in trade mark matters, according to which the scope of protection of a national trade mark is limited to the territory of Germany due to the territoriality principle applicable in intellectual property law.

With respect to online infringement, not every internet offer for goods or services from abroad that can be accessed in Germany triggers trade mark claims. Rather, the offer must have a sufficiently economically relevant domestic connection or ‘commercial effect’.

Whether a relevant infringement has occurred in Germany only requires special findings if the contested conduct has its focus abroad. In such a case, there is a risk of an unlimited expansion of the protection of national trade mark rights and an unreasonable restriction of the economic development of foreign companies.

The judges held that these principles also apply to copyright law because of the territoriality principle.

Therefore, it had to be determined by way of an overall balancing of interests whether a relevant infringement had taken place in Germany. On the one hand, the effects of the contested use on the domestic interests of the right holder must be taken into account. On the other hand, the decisive factor is whether and to what extent the infringement is an unavoidable side effect of technical or organizational circumstances over which the defendant has no control, or whether the defendant purposefully benefits from the accessibility in Germany.

The mere accessibility of a website and the consideration that there is always the possibility that non-German-speaking consumers residing in Germany might prefer a foreign website primarily aimed at the non-German market does not constitute a sufficient domestic connection. Not implementing geo-blocking (i.e. the identification of an internet user’s IP address and blocking foreign IP addresses from entering a website) does not necessarily allow the conclusion of a sufficient domestic connection, especially if the domestic effects of the use are of minor significance.

The judges found these principles to be consistent with EU law. The Court of Justice of the European Union (‘CJEU’) confirmed in Pez Hejduk (IP Kat here) that the protection of copyright is limited to acts committed in the territory in which it exists (at para. 22). The CJEU’s finding that a website need not be directed at the Member State of the court seized was limited to the assessment of international jurisdiction in accordance with Art. 5 no. 3 Brussels I (now Art. 7(2) Brussels I recast). It did not concern the assessment of copyright infringement.

The plaintiff’s argument that the principles for trade mark infringement cannot be transferred to copyright because the latter is not, unlike the former, a ‘genuinely economic exploitation right’ was rejected. The Court agreed that copyright also has a personal rights component. However, copyright is still a uniform right in which personal and property rights are inextricably intertwined. When examining a commercial effect, all copyright-relevant effects in Germany must therefore be taken into account.

Based on these considerations, the judges confirmed the Higher Regional Court’s denial of a commercial effect of the contested use: 

• The mere accessibility of the website was not sufficient in itself.
• The top-level domains .kz and .ua indicate that the websites were aimed at consumers in Kazakhstan and Ukraine and not in Germany.
• The phone numbers and email addresses on the websites had no connection to Germany. The goods were not shipped to Germany either.
• The fact that the defendant delivered the goods from Germany abroad said nothing about the websites’ target public. The online offers address only a tiny fraction of the German population, if at all, namely those consumers who might be interested in ordering clothing items via the websites in question in order to send them to friends or relatives in Kazakhstan or Ukraine, or to have them sent to Germany by them.
• The defendant also operated a German website with the top-level domain .de. It is easier and more convenient for German consumers to order from this website.
• The German article descriptions and error message were considered to be a consequence of the (former) use of identical pictures on all of the defendant’s websites. Further, the error message was only displayed if the goods could not be ordered.
• The general terms and conditions of the defendant’s website stated that German law was applicable. The judges found that this did not have a significant impact on the attractiveness of the website but rather served the defendant’s own interests.
• The Kazakh and Ukrainian currencies on the websites spoke against a focus on Germany.

Overall, the defendant’s use of the pictures had a limited impact on the plaintiff's domestic interests. As a consequence, the fact that geo-blocking was not employed did not significantly weigh against the defendant in the overall assessment of the commercial effect.

For these reasons, the Court confirmed the denial of a commercial effect of the contested uses and, thus, copyright infringement.

Comment

The Court’s ruling underscores the importance of the territoriality principle in the context of online infringements, regardless of whether trade mark or copyright infringement is concerned. The question of a commercial effect requires a thorough review of the contested use and the website on which it is displayed and an overall balancing of the parties’ interests. 

 

The picture is by Henrique Feiten and used under the licensing terms of Pexels.com.