No Music Is "Free of Broadcasting Rights", French Court Rules

In the world of music licensing, a cautionary tale was recently told by the French Cour de Cassation involving background music, a carpet store and collective management societies.

Musicmatic France (now Storever France) is a company providing "audio concepts for higher customer satisfaction", a.k.a. background music in stores. The company rents out audio equipment to stores and streams music adapted to the respective clientele. Musicmatic sources its music from musicians and other right holders under a creative commons licence agreement.

Red carpets are overrated

Tapis Saint Maclou, a French carpet store, concluded an agreement with Musicmatic and used the equipment over several years in many stores. The agreement explicitly mentioned that the streamed musical works are "free of all broadcasting rights".

In 2013, SACEM, a French collective rights management society, asked that Tapis Saint Maclou pay nearly EUR 120'000 (plus interest), corresponding to the equitable remuneration contemplated by Art. L.214-1 of the French Code of Intellectual Property. Under this provision (which is the French equivalent of Art. 8(2) of the Rental Directive 2006/115), where a phonogram has been published for commercial purposes, neither the performer nor the producer can prevent its direct communication in a public place. However, such communication gives rise to a right to remuneration for the benefit of performers and producers. The remuneration is to be paid by the person using the phonogram for commercial purposes.

In a judicial battle that lasted for six years, all three instances (the Paris Tribunal de Grande Instance, the Paris Court of Appeal and the Cour de Cassation) ordered that: (1) Tapis Saint Maclou pay the requested equitable remuneration to the collecting society; and (2) Musimatic pay the same amount to Tapis Saint Maclou for breach of contract.

As often, the decision of the Cour de Cassation is too short to understand the background of the case [or really anything at all except for the abstract legal issues at stake], so this Katpost is largely based on the decision of the Paris Court of Appeal (available here), now confirmed on all points by the Cour de Cassation.

Obligation to Pay the Equitable Remuneration

On the main issue of the dispute, neither the Court of Appeal nor the Cour de Cassation had any doubts. Tapis Saint Maclou is liable to pay appropriate remuneration, being the "person who uses the phonogram for commercial purposes". The agreement concluded between Tapis Saint Maclou and Musicmatic does not modify the scope of the statutory provision under which Tapis Saint Maclou is to make the respective payment to the collecting societies.

Musicmatic argued that, on this issue, French law is not compliant with the EU Rental Directive. It contended that: (1) mandatory collective management of the equitable remuneration pursuant to Art. 8(2) of the Rental Directive is incompatible with EU law; and (2) performers who are not members of collecting societies will in fact never see any share of any such remuneration, which is also contrary to the Rental Directive. Musicmatic asked that both issues be referred to the CJEU.

None of the three courts referred either of these issues to the Court of Justice. As set forth by the Court of Appeal (and confirmed by the Cour de Cassation), the Rental Directive does not contain any mandatory provisions on the implementation of equitable remuneration. Member States are thus free to use any legislative tool that ensures "equilibrium between the interests of performers and users".

With regard to the allegation that only members of the collecting societies receive their share of adequate remuneration, the Court of Appeal disagreed (as did the Cour de Cassation). It is sufficient for non-members to communicate their identity and specify their claim to receive their respective share.

Liability for Contractual Breach

The Court of Appeal (as confirmed by the Cour de Cassation) considered that the contractual clause, providing that the streamed musical works are "free of all broadcasting rights", is misleading. It creates the impression that the licensor has granted more rights to the licensee than it actually has – or is able to. Musicmatic has never been in a position to provide music "free of all broadcasting rights" and it has thus misled its licensee. Musicmatic is therefore liable to pay to Tapis Saint Maclou the full amount of the remuneration the latter was ordered to pay to the collecting society.

Comment

One interesting aspect of this decision is the lack of any discussion of the principle "ignorance of the law is no excuse" [nemo censetur ignorare legem for Kat readers fond of Latin]. French law apparently provides for a mandatory remuneration to be paid by the "user" of the work to the collecting society; thus the obligation to pay this remuneration cannot be overridden by contract.

Can the user, therefore, assume that a contract concluded with a third party will exempt it from the obligation to pay? Or is there perhaps a specific duty on the licensor to inform the licensee that additional payments to the collecting societies will have to be made? One may assume that in business-to-business transactions, neither party has to inform the other about the existence of statutory rules.

Under the rule established by this decision, licensing musical works "free of all broadcasting rights" in France makes the licensor liable for additional payments to the collecting societies. Whether this holds true in other European jurisdictions remains to be seen.