CJEU to decide whether publishers may receive CMO-run funds from private copying

The German Federal Court of Justice has recently made a new request for preliminary ruling to the Court of Justice of the European Union (CJEU). Case C-840/24 concerns the distribution, by collective management organisations (CMOs), of proceeds from private copying and lending rights. The questions are not yet available officially, but may be accessed through the national proceedings (I ZR 135/23). The request asks whether publishers may benefit from a fund, run by a CMO and funded through compensation for private copying exception and public lending rights.

National proceedings

The plaintiff in the national proceedings is an author of scientific works. In addition to his own claims, he also acts in the name of another author who assigned to him rights for his travel guides (‘assignor’). They are both members of VG Wort.

VG Wort, the defendant, is a German CMO that represents both authors and publishers. It mainly collects private copying levies, but also for other rights, including public lending rights. VG Wort runs a Science Promotion Fund, using part of the collected remuneration to this end. According to VG Wort, the legal basis for this is Sec. 32(1) of the German Copyright Act, according to which “collecting societies are, as a rule, to promote culturally important works and contributions”.

The Science Promotion Fund (the activities of which were paused in light of the litigation) used to grant printing cost subsidies. While under German law only authors are entitled to compensation from private copying, both authors and publishers could receive funding from the Science Promotion Fund, provided that they are members of VG Wort.

The plaintiff contested all of this, on his own behalf and on behalf of his assignor, arguing that publishers should not be indirectly entitled to proceeds from private copying and from public lending rights, and that VG Wort’s acts reduced the remuneration due to the plaintiff and to the assignor. The plaintiff also challenged the direct distribution of remuneration (i.e. not through the Science Promotion Fund), whereby payments were made to publishers over the use of collective works.

The Munich Regional Court (LG Munich) first and, then, the Munich Higher Regional Court (OLG Munich) essentially sided with the plaintiff (29 U 7919/21). The OLG Munich found that, rather than falling under Sec. 32(1) on promotion of culturally important works, the Science Promotion Fund would fall under Sec. 32(2) of the German Copyright Act (paras. 106 and 115). Under this provision, CMOs may establish welfare and assistance schemes but only to the benefit of their entitled persons (i.e. rightholders).

CMOs must distribute income from their activities exclusively to rightholders and only based on the exploitation of the rights in question. Other parties, including those who are members of the CMO, are not entitled to a share of the CMO’s income (paras. 65-68). Consequently, the income from private copying levies, this being a limitation to reproduction rights, and from public lending must be distributed among the authors, who are those entitled under these two rights.

All the above said, OLG Munich found that the plaintiff’s claim was only justified with regard to the rights of the assignor, and not to his own rights. This is because during the period considered in the lawsuit, the Science Promotion Fund was funded from the public lending right and the plaintiff’s works were not generating any revenue from this right (para. 133).

VG Wort appealed the ruling to the Federal Court of Justice, claiming that the Science Promotion Fund would (a) fall under Sec. 32(1) of the German Copyright Act, it being the implementation of Art. 12(4) Directive 2014/26/EU, and (b) be lawful because Sec. 32(1) is not limited to beneficiaries only.

Questions referred to the CJEU

The Federal Court of Justice has decided to stay the proceedings and ask the CJEU the following:

- whether, when a CMO engages in promotion of culturally significant works and, as a result, recipients who are not rightholders benefit from such promotion, this is compatible with Arts. 11(4) [use of CMO revenues] and 12(4) [deductions for social, cultural and educational services] Directive 2014/26/EU, as well as Art. 5(2)(b) [private copying exception] Directive 2021/29/EC and Art. 6(1), first sentence [derogation from the exclusive public lending right] Directive 2006/115/EC;

- if the provision of social, cultural and educational services is only allowed to rightholders, whether the recipient must have a current right to remuneration or whether ownership of a copyright or related right for which remuneration is not currently distributed is sufficient; whether the recipient must be a CMO’s member.

Comment

The latest request for the preliminary ruling concerns the knotty question of EU copyright law: whether publishers can be beneficiaries of fair compensation for private copying.

In 2015, the CJEU ruled in the Reprobel judgment that publishers are not entitled to such fair compensation ab initio, as they are not among the reproduction rightholders and do not suffer actual harm from the private copying limitation [see The IPKat here]. In 2016, finding this approach detrimental to the publishing market, the European Commission included in its proposal for the DSM Directive what subsequently become Art. 16 Directive 2019/790/EU.

Under Art. 16, Member States are allowed to (but not obliged to) adopt national legislation under which publishers are entitled to a share of the compensation for the use of the work made under an exception or limitation to the rights that have been transferred or licensed to them. This, however, is without prejudice to any existing or future national law concerning public lending rights.

Member States such as France, Spain and Belgium [see also a recent ruling by the CJEU on the private copying in Belgium] followed the option found under Art. 16 and do include publishers as beneficiaries of the private copying levy. This is not, however, the case of Germany, where only authors are entitled to fair compensation.

The CJEU will now have to clarify whether, in systems like the German one, publishers may benefit from such revenues indirectly. If the CJEU continues to follow its author-centric approach, the answer may be in the negative.