Saturday, December 15, 2012

Czech Court Asks CJEU: Is Teritorrial Monopoly of Collecting Societies Compatible with Free Movement of Services?

After BSA C-393/09, another copyright preliminary reference from Czech courts is making it's way to the Court of Justice of EU. This time, on exemptions to the 'communication to the public' right, conformity of the territorial monopoly of collecting societies with Union law and possibility of the Horizontal Direct Effect of InfoSoc directive.

The new reference for a preliminary ruling was lodged on 24 July 2012 and comes from Regional Court in Pilsen. It was filed in course of pending case - Ochranný svaz autorský pro práva k dílům hudebním, o.s. (OSA) v Léčebné lázně Mariánské Lázně, a.s.; Curia notation is OSA C-351/12 . So what is it all about?

1. Must Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society be interpreted as meaning that an exception disallowing remuneration to authors for the communication of their work by television or radio transmission by means of television or radio receivers to patients in rooms in a spa establishment which is a business is contrary to Articles 3 and 5 (Article 5(2)(e), (3)(b) and (5))?

2. Is the content of those provisions of the directive concerning the above use of a work unconditional enough and sufficiently precise for copyright collecting societies to be able to rely on them before the national courts in a dispute between individuals, if the State has not transposed the directive correctly in national law?

3. Must Article 56 et seq. and Article 102 of the Treaty on the Functioning of the European Union (or as the case may be Article 16 of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market) be interpreted as precluding the application of rules of national law which reserve the exercise of collective management of copyright in the territory of the State to only a single (monopoly) copyright collecting society and thereby do not allow recipients of services a free choice of a collecting society from another State of the European Union?

On the first question; I already requested the Czech referral decision to see what is exactly is the legal problem there. It seems to me that the court is essentially asking if exempting commercial spa establishments from 'communication to the public' royalties is compatible with copyright exceptions system of Art. 5 InfoSoc. According to the available information, disputed in case is whether copyright exception for 'Social Facilities' shall apply (Section 38e of Czech Copyright Act) and whether this would be compatible with Art. 5 InfoSoc.

[CZ] § 38e Licence pro sociální zařízení
Do práva autorského nezasahuje také poskytovatel zdravotních služeb nebo sociální zařízení, kteří nebyli zřízeni nebo založeni zdravotnické nebo sociální zařízení, které nebylo zřízeno nebo založeno za účelem dosažení zisku, zejména nemocnice a věznice, které zhotoví záznam vysílaných děl a takto zaznamenaná díla provozuje osobám umístěným v těchto zařízeních v rozsahu odpovídajícím účelu této licence. ..

[EN] Section 38e Licences for Social Facilities
Copyright is not infringed by a health-care or social institution that was founded or established for noncommercial purposes, particularly hospitals and prisons, which make reproductions of broadcasted works and perform such reproduced works to the persons located in such institutions to the extent adequate to the purpose of this licence. ..
Czech collecting society - OSA - claims that spa establishment is not a health-care institution, but equivalent to the hotel and thus should not be exempted. What I find puzzling is that preliminary reference mentions that spa establishment in issue is 'a business' (entity), which could already indicate that Section 38e wouldn't apply (as its limited to non-commercial purposes). The Defendant, Mariánské Lázně, is the second largest Czech spa town with a wealth of mineral springs. I will update you here as soon as I receive the decision from Pilsen.

Update 1. Very kind reader, Martin Prokeš, says that problem in the pending case is of different nature than interpretation of Section 38e. He says:
Dear Hutko, it is not about § 38e, but about third sentence in § 23 of czech copyright act. The basic question is, if two hospitalized persons can be considered as a public. I dont think so (see german judicature "Zweibettzimmer im Krankenhaus"). Patients stay in spa around 21 days in average (statistically), hotel guests stay around 2-3 days.
If we consult Section 23, it makes it more clear where is the problem.
Section 23
Performing the broadcast of a work shall mean that the work broadcast by radio or television is made available by means of a facility technically capable to receive such broadcasts. Making the work available by means of facilities technically capable to receive broadcasts to guests accommodated within the provision of accommodation services shall not be considered, under Article 18 Paragraph (3), as performance of broadcast reception where such facilities are located in the rooms intended for private use by the accommodated persons. Making the work so available to patients to whom health care is provided in health care and medical facilities shall also not be considered, within the meaning of Article 18 Paragraph 3, as performance of a broadcast work.
But even now, the second filed question does not make much of sense (see below). Even if the CJEU would say that commercial spas definitely shouldn't be exempted from the 'communication to the public right', solution for the national court is the same. Do teleological reduction forced by indirect effect of the directive and thus exclude the spas from the notion of the 'health care facility'. Even if we apply (IMHO super-confusing) test applied in SCF Consorzio Fonografici C-135/10 or Football Association Premier League C-403/08, SGAE C-306/05 and Phonographic Performance v Ireland C-162/10, I don't see much of exit for the commercial spas from the scope of the right. This because the communication of the works to the spa guests is:
i) a conscious decision of the spa operator (§ 82, SCF Consorzio Fonografici C-135/10),
ii) even one or two-bedroom apartment guests of spa constitute at least a subsequent public (§ 84-87, SCF Consorzio Fonografici C-135/10, Mediakabel C-89/04, SGAE C-306/05), and
iii) a spa business operator has a financial benefit from the music that is being communicated (§ 204, Football Association Premier League C-403/08, § 88-90 SCF Consorzio Fonografici C-135/10).

Update 2. Reader Martin explains in the comments further context of the decision of the Czech court.

On the second question; Here I am even more curious. It is well established case law that where proceedings between individuals are concerned, the CJEU has consistently held that a directive cannot of itself impose obligations on an individual and cannot therefore be relied on as such against an individual [see, inter alia, Case 152/84 Marshall, paragraph 48; Case C‑91/92 Faccini Dori, paragraph 20; and Pfeiffer and Others, paragraph 108, Case C-555/07, Seda Kücükdeveci, paragraph 46]. After Seda Kücukdeveci the court has basically two options when dealing with the Union non-conform legislation. 
  • it can either try to interpret national law as much as possible in the light of Union law (indirect effect of the Union law) or
  • refuse to apply if faced with a national provision falling within the scope of European Union law which it considers to be incompatible with that principle, and which cannot be interpreted in conformity with that principle. It must decline to apply that provision, without being either compelled to make or prevented from making a reference to the Court for a preliminary ruling before doing so.
This, of course, does not solve all the situations (e.g. when you need to base your right on Union law). In the present case, from information I have now, I don't see why Czech court couldn't just interpret Section 38e in the light of whatever interpretation of the Union law is meant to be. Saying that business spa establishment is not a health-care institution and thus falls outside of the statutory exception would do the trick if CJEU rejects it's compatibility with Art. 5 InfoSoc.

On the third question; This part of preliminary reference is a mere consequence of the ruling of the Constitutional Court, on which we reported here. This questions are still likely to be filed also from Prague court soon. The problem there was following:

In November 2011, the Czech Constitutional Court, in its ruling II. ÚS 1658/11, canceled decision of the City Court in Prague and referred it back (due to breach of  a right to statutory judge), arguing that the court failed to ask the Court of Justice of European Union on issue of whether Czech Copyright Act, which sets out certain limits to operation of collective societies is compatible with free movement of services. The Constitutional Court specifically questioned whether monopoly of collective societies [in CzechR, one type of right can be administered by one subject only - § 98(6)(c)] and necessity to obtain authorization from the Czech Ministry, is still compatible with Art. 56 TFEU and/or Art. 14 and Art. 16 of Directive 2006/123/EC on services in the internal market.

The Constitutional Court mentioned that it is questionable whether Directive 2006/123/EC applies to the relationship between collective society and user of the work, and if so, the current wording of the Copyright Act might be in breach of following provision of Art. 16.


The Constitutional Court also briefly discussed possibility of applying competition law, Art. 101 and Art. 102 TFEU, pointing to recent decision in Football Association Premier League C-403/08 and Karen Murphy C-429/08. Lets see what is now going to happen on City Court in Prague.
This in my view, represents the most interesting part of the preliminary reference. I will keep you posted.

Update 3. Fellow Blogger, Katerina Stechova, published a brief note on the Kluwer Copyright Blog.

Update 4. Czech Supreme Court decided on similar case few weeks ago.


Martin Prokeš said...

Dear Hutko, it is not about § 38e, but about third sentence in § 23 of czech copyright act. The basic question is, if two hospitalized persons can be considered as a public. I dont think so (see german judicature "Zweibettzimmer im Krankenhaus"). Patients stay in spa around 21 days in average (statistically), hotel guests stay around 2-3 days. So I do not think, that it is the same situation as in the case SGAE ca. Raffael Hoteles. Some months ago, there was also interesting decision in the case of "italian dentist", but I am out of my office right now. If you are interested in this case, let me know. Best regards, Martin Prokeš

Huťko said...

Dear Martin,

thank you very much for your learnt and helpful comment. I included your information into the post, also with my response to it.


Martin Prokeš said...

Dear Huťko, sorry for longer comment: 1) according to czech public law, spas are health care facilities, registered as such by the state (so if you say they are not, it would be contra verba legis), 2) majority of the spas are non-governmental health care facilities, 3) the patients are hospitalized there on order of their physician and under supervision of spas physician 4) during the treatment have incapacity for work from the viewpoint of social security and labor law and are obliged to follow the curative regime, and finally 5) spas have no profit from placing TVs or other receivers in the rooms at all. Also I have to say: spas ≠ wellness centers; this case is about patients hospitalized in spas, not the wellness guests.

There is no profit of the spas from placing TVs, because: the treatment is on order of physician purely for medical reasons incl. the natural healing resource of spa (so placing TV will not increase the number of patients), the treatment (which includes accommodation) is fully paid from public health insurance and there are no additional payments for TVs and other receivers (from insurance nor from patients).

There is a difference between hotel guests and hospitalized patients in health care facility. See BGH - Urteil - I ZR 22/94 - 11.07.96: »Zweibettzimmer im Krankenhaus - Die Wiedergabe geschützter Musik- und Sprachwerke mittels eines Fernsehgeräts im Zweibettzimmer eines Krankenhauses fällt nicht unter den Begriff der (grundsätzlich vergütungspflichtigen) öffentlichen Werkwiedergabe von Funksendungen nach § 22 i.V. mit § 15 Abs. 3 UrhG.« and later BGH, Urt. v. 12.11.2009 – I ZR 160/07.

So I don’t think, that hospitalized patients can be considered public or subsequent public, even if we apply “super-confusing test of Italian dentist”, because 1) there is a special relationship between together accommodated patients, 2) 1 or 2 patients do not meet the “fairly large number of people” criterion, 3) fluctuation of the patients is 7x lower than the fluctuation of the hotel guests (so the criterion is not met even cumulatively) and 4) there is no profit for spas from placing receivers in the rooms at all.

Finally: nobody can be hospitalized in spas for other than a medical reason on order of person’s physician. Compare this to hotel, where anybody can come at any time…

Huťko said...

Dear Martin,

I really appreciate your feedback, thank you for more and more of additional information.

Your information obviously change a lot. Could you also point me to the law according to which they are being registered? My perception is however, if the spa is health-care facility and CJEU says that it's against the Union law to exclude them, I don't see any reason why for the purposes of the Copyright Act, you couldn't narrow down the scope of health-care facility. And yes, it would go 'contra verba legis', but the teleological reduction always does.

The problem with BGH decision (I ZR 22/94) is that it's quite old. It was rendered as application of the German law before the InfoSoc Directive was part of the German legal order. As 'communication to the public' is autonomous concept of Union law now, it might be helpful to point to BGH decision, but not any more very conclusive. Could you please clarify where does the second decision (I ZR 160/07) deal with our problem?

I believe that both the i) and ii) requirements would be still met. After your aditional information I however slightly doubt about the iii). It can be still argued that different spas compete with each other and patients can still decide where to go upon the package of services that is being provided (confort being one of them). So there is still some competition between the spas as far as I understand it .. I will think about that ..

I really appreaciate your dicsussion and would be glad if you have still some follow-up arguments.


Martin Prokeš said...

Dear Huťko, see Act No. 372/2011 Coll., sections 3/3, 5/2/f), 9/2, 74/1/m) and Act No. 48/1997 Sb., sections 13/2/a) and /i), 16a/1/f) and 33/2.

The third sentence of section 23 is clear. It was not changed after SGAE ca. Raffael… (in the opposite, the second sentence about hotels was changed in reaction to this judgement). The conditions for teleological reduction are not met (there is no „not foreseen incompleteness of legislative acts” ). If there is any conflict, the interpretative methods recognized by Czech law do not enable the possibility to avoid conflict with EU law. But I don’t think, that there is.

The second German decision (I ZR 160/07 dated 12.11.2009) mentions the first one in § 49 in fine – affirmatively. I think, that if some group of people is public depends generaly on the: 1) number of the people, 2) their mutual relations. See setion 15/3 of german Urheberrechtsgesetz („Die Wiedergabe ist öffentlich, wenn sie für eine Mehrzahl von Mitgliedern der Öffentlichkeit bestimmt ist. Zur Öffentlichkeit gehört jeder, der nicht mit demjenigen, der das Werk verwertet, oder mit den anderen Personen, denen das Werk in unkörperlicher Form wahrnehmbar oder zugänglich gemacht wird, durch persönliche Beziehungen verbunden ist.“).

The point is, that according to my opinion, third sentence in section 23 of Czech copyright act is not a exclusion from rights – it just says, that hospitalized patients do not constitute public (cf. reference to section 18 of czech copyright act in section 23), ... It is just poorly written.

Huťko said...

Dear Martin,

We both agree that (i) of 'dentist test' is satisfied. You are arguing that clients of spa do not constitute the public (ii) and even if, the communiaction to the clients is not of commercial benefit to commercial spa operator (iii). Let's focus on your first argument.

Who consitutes the public.

First of all, as I said earlier, the fact that German Act uses any definiton of the public is of no significance. 'Right to communicate to the public' is an autonomous concept of the Union law set, among others, in art. 3 InfoSoc. Thus national law can not define the 'public' otherwise than Union law does. And Union law does mostly by means of the CJEU jurisprudence. It says that:

"the term ‘public’ within the meaning of Article 3(1) of Directive 2001/29 refers to an indeterminate number of potential listeners, and, in addition, implies a fairly large number of persons", [§ 84]

"as regards, the criterion of ‘a fairly large number of people’, this is intended to indicate that the concept of public encompasses a certain de minimis threshold, which excludes from the concept groups of persons which are too small, or insignificant." [§ 84]

"In order to determine that number, the Court took account of the cumulative effects of making works available to potential audiences (SGAE, paragraph 39). In that connection, not only is it relevant to know how many persons have access to the same work at the same time but it is also necessary to know how many of them have access to it in succession ." [§ 87]

The main point of the discussion is whether clients of spa constitute 'the public'.

1. The first argument in favor is that patients constitute private circle of persons even thought they didn't know each other before entering the spa facility - argument of BGH in BGH, I ZR 22/94 ("Anders stellt sich die Sachlage aber dar, wenn einander fremde Menschen - wie hier die Bewohner eines Zweibettzimmers eines Krankenhauses - gehalten sind, den anderen an ihrem privaten Bereich teilnehmen zu lassen. Sie öffnen damit (notgedrungen) einen Teil ihres persönlichen Lebensbereichs dem Zimmergenossen, ohne daß damit die private Sphäre, die auch insoweit im Krankenzimmer herrscht, aufgegeben wird. Der Aufenthalt der Kranken in einem Zweibettzimmer bringt vielmehr eine gemeinsame private Sphäre mit sich, deren Achtung die Zimmerbewohner auch von Dritten verlangen können, die sich nicht um ihre Behandlung zu kümmern haben. Die Revision weist zutreffend darauf hin, daß gerade wegen der Behandlungsbedürftigkeit, des Ruhe- und Schonungsbedürfnisses von Kranken für den Bereich eines Krankenzimmers eine Privatheit unter Ausschluß der Öffentlichkeit anzunehmen ist."). Whether CJEU would accept this argument I can't tell. This is argument however, is IMHO not very convincing taking into account the CJEU jurisprudence on hotels. Arguably, also hotel guests that stay several days in the hotel, create their private circle in the hotel rooms.

2. The second argument can be made that this kind of spas shall be covered by de minimis exemption, which excludes from the concept groups of persons which are too small, or insignificant (see § 84). In other words are that spa guests are not 'fairly large number of people who have access to work in succession'. Your good argument is that 'fluctuation of the patients is 7x lower than the fluctuation of the hotel guests'. What does it however mean, how many guests thus have access annually?

Huťko said...

As to the nature of Section 23. It is IMHO intended to exempt certain facilities from the 'communication to the public', by saying they do not constitute the public. As I pointed above, if CJEU would think otherwise (that even guests of health-care facilities constitute the public), it means that only other way how you could legitimize Section 23, last sentence, is by trying to construct and see it is an exception to copyright. Here however, you still clash with exhaustive list of Art. 5(2) of InfoSoc, so it doesn't help.

As to the consequence for the national court, if CJEU thinks spa clients constitute the public. I have to disagree with your statement on teleological reduction. Czech and Slovak interpretation methods are not really different from German ones, I hope we agree here. Teleological reduction is meant to fill in certain 'gaps in law' (Gesetzlücke). Imcompatibility with the Union law, arguable opens such a gap in the law [planwidrigen Unvollständigkeit des Gesetzes (eine verdeckte Regelungslücke)]. German jurisprudence of BGH is of the same opinion. E.g. BGH, VIII ZR 70/08 states: "Der von der Rechtsprechung des Gerichtshofs geprägte Grundsatz der richtlinienkonformen Auslegung verlangt von den nationalen Gerichten aber mehr als bloße Auslegung im engeren Sinne. Er erfordert auch, das nationale Recht, wo dies nötig und möglich ist, richtlinienkonform fortzubilden (Senatsurteil vom 26. November 2008 - VIII ZR 200/05, BGHZ 179, 27 Rn. 21 mwN). Daraus folgt hier das Gebot einer richtlinienkonformen Rechtsfortbildung durch teleologische Reduktion des § 439 Abs. 3 BGB auf einen mit Art. 3 der Richtlinie zu vereinbarenden Inhalt.". The goal of Section 23 is to mirror the Union law. If it does not, it shall be interpreted in a way which serves this purpose. If you reject teleological reduction to serve the Union law, would you do the same when it comes to constitutional law?


Martin Prokeš said...

Dear Huťko, thank you very much for you reply and arguments.

Who constitutes the public?

Of course, that “Right to communicate to the public' is an autonomous concept of the Union law…”, but written EU law and international treaties do not define public. On the other hand CJEU is obliged to follow international law, incl. “copyright” treaties. The interpretation of the term “public” in member states of the treaties is therefore, according to my opinion, at least worth looking.

In Mediakabel § 30 CJEU told us, that public is “indeterminate number of potential television viewers” (practically everybody). In SGAE ca. Rafael Hoteles SA § 38 CJEU added that it necessary to take into account not only customers in hotel rooms, but also that they quickly succeed each other. So in the end they fairly large number of persons are involved, so that they may be considered to be a public. In C-135/10 “Italian dentist” § 95 CJEU cleared that patients of the dentists “constitute a determinate circle of potential recipients, as other people do not, as a rule, have access to treatment by that dentist.” and in § 97 dentist cannot reasonably either expect a rise in the number of patients because of that broadcast alone or increase the price of the treatment he provides. The patients of a dentist visit a dental practice with the sole objective of receiving treatment, as the broadcasting of phonograms is in no way a part of dental treatment (§ 98).* I see strong similarity with spas here.**

If the only criterion is number of the people, try to think about wedding. I am sure, that there is a number of wedding guests, when both of us say enough, they clearly constitute public (300+?). But what about 100 or let’s say 70? Are 70 wedding guests public? Well, I don’t think so. 70 wedding guests do not constitute public. But if you want to play live concert for 70 paying visitors, we probably agree, that they do. The difference lies, according to my humble opinion, in their mutual relation or the absence of it (the second criterion).

To the teleological reduction: yes, the methods are AFAIK the same (if you open Melzer, F., Methodology… , probably the best book on the topic in czech, the citations are from DE+A works). But if discussed provision of czech law is in collision with EU law, it is not the situation, where regulation is missing without reasonable ground and adequate interpretation is too wide. Czech parliament adopted § 23 third sentence intentionally and made no changes to it after “Rafael”, but changed the second sentence. Therefor it is not gap against the plan (planwidrig) as it was intentionally created and confirmed. Opposite interpretation (by the state registered health care facility is not a health care facility) would also collide with principle of legal certainty – part of primary EU law (and law in general).

*Btw. second sentence of “Italian dentists” § 96 is little bit confusing (if you transmit live and unchanged broadcasting, the successive members of the public will obviously never receive the same broadcasting) and § 99 can be interpreted like the “for profit” criterion is sine qua non condition of communication to the (only successive?) public.
** Yes, there are points supporting your position too.

Huťko said...

Dear Martin,

sorry for the delay, but it's busy period now. But I will definitely get back to this great discussion soon.

In regard to methodology. Teleological reduction is really required here. I have put together short piece in Slovak about that, and will soon put it on some Slovak/Czech blog because I think it's quite interesting problem; I will supply link here then of course as well.


Huťko said...

The promised methodological commenthere.

Huťko said...

Martin, I just had a great discussion about this issue with colleage of mine and she had a very interesting argument to be made in this case. She promised to post it here soon.

Just to tell you that I didn't forget.