FAPL and Pub Landlady Both Lose in ECJ Fight - So Who Wins?

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Cases C-403/08 and C-429/08: Football Association Premier League Ltd & others vs QC Leisure & Others / Karen Murphy vs Media Protection Services Ltd

In February 2011 we reported the Advocate-General's non-binding opinion in these joined cases. Her Opinion argued that the territorial exclusivity provided for in the FA Premier League's (FAPL) contracts with broadcasters contravened the fundamental EU law principle of freedom to provide cross-border services.

The Advocate-General's view has now been upheld by the European Court of Justice (ECJ) in a ruling which may bring sweeping changes to the way in which sports and other rights are licensed in future. A summary of the background and the judgment appear below. In summary, however, contrary to many media reports, the pub landlady, Karen Murphy, did not win and pubs and other commercial premises will not be permitted to show football matches using foreign decoder cards. The reason is that the use of the foreign decoder cards in pubs communicates to the public certain copyright works incorporated in the broadcast. The key element of the decision, however, is the impact on rights-holders - not just sports rights-holders - who may no longer sell rights on an exclusive territorial basis.

CONCLUSIONS OF THE CASE

The key conclusions from this long and complex judgment are that:

partitioning of the EU on a territorial basis is unlawful and any contracts which seek to establish separate exclusive territories based on national borders will be prohibited; the use of authorised decoder cards which have been put on sale in the EU is lawful (it does not change the position regarding counterfeit or unauthorised decoder cards); there is no copyright in a football match per se, although other copyright works will be protectable, such as the rights-holders' logo & music; Karen Murphy may not show FAPL matches in her pub using a non-UK decoder card because she would be "communicating to the public" the copyright elements that have been held to exist.

Background

The footprint of a satellite broadcast is not limited by national borders. Content owners such as the FAPL have therefore limited access to the licensed content by controlling the distribution of decoder cards on a territorial basis through their distributors such as BSkyB.

This case arose because pubs in the UK, such as that run by Karen Murphy, were purchasing foreign decoder cards rather than the more expensive authorised BSkyB subscription. The foreign decoder cards are not only cheaper but allow pubs to show the Saturday 3pm matches, which no UK broadcaster is permitted to show live.

Proceedings were originally brought in the High Court in 2005 and questions were asked of the ECJ, which is the highest European Court. No appeal is available from the ECJ.

The Judgment

In answering the questions put to it by the High Court, the ECJ's judgment comes to the following key conclusions:

Authorised decoder cards sold in one Member State cannot be prohibited from use or resale in other EU Member States. Any national legislation which precludes the importation and resale of such decoder cards is unlawful. Importation and resale is lawful, even if the decoder card was obtained by the user giving a false name and address or if it is used for commercial purposes when it was intended only for private use. Rights holders licensing content to a broadcaster may not impose a prohibition on the broadcaster's ability to distribute decoding devices or supply content outside of its licensed territory (so-called "absolute territorial protection"). Therefore any agreement designed to stop cross-border provision of broadcasting services is deemed to be anti-competitive and prohibited by EU competition law. The ECJ considers that such provisions cannot be exempted from the prohibition.  With regards to the protection of FAPL's copyright, the ECJ held there is no copyright in a football match per se, since sporting events cannot be "the author's own intellectual creation". They are not "copyright works". The only copyright works are those elements (such as opening music, logos and credits) belonging to the rights-owner. Transient copies of those copyright works were being reproduced in fragments in the decoder device buffers and on the television screens. However, the mere reception of broadcasts (i.e. the picking up of the broadcasts and their visual display) in private circles is a "lawful" use of a work. The temporary acts of reproduction have no independent economic advantage separate from that provided by the mere reception of the broadcasts. Therefore those temporary reproductions do not require the rights-owners' consent. Pub customers are a new public because they were not taken into account or considered by the authors of the protected works. Accordingly, there is an unlawful, profit-making communication to the public of the copyright works by the publicans.

IMPACT OF THE CASE

The immediate significance of the case is the impact it has on rights-holders who have for years sold rights to broadcast the events on a country-by-country basis.

An exclusive arrangement for broadcasting rights in one Member State may have less value, when authorised decoder cards from another country permitting cheaper access may be imported and used by the public. There are, however, some practical limitations to the impact of the decision, discussed below in the context of BSkyB.

From the pubs' perspective, many media outlets have reported the case as a victory for Karen Murphy. In fact, whilst FAPL lost a number of arguments, she lost a key argument as well: pubs will be communicating copyright works to the public (an infringing act) by the unauthorised display of football matches in their pubs. We do not consider that it will be possible for Karen Murphy to show the FAPL matches in her pub using a non-UK decoder card because of the copyright elements that have been held to exist and which would be communicated.

In reality, we do not believe this case will greatly impact upon BSkyB's ability to monetise its rights. Firstly, some of BSkyB's current customer base is abroad and accessing the feed unlawfully and the decision therefore legitimises such foreign customers' existing activities. More importantly, we believe that very few, if any, of BSkyB's current subscribers are likely to cancel their subscriptions and replace them with cheaper foreign decoder cards. In order to do so they would have to dispense with the full package of BSkyB channels, content and equipment, and purchase new decoder cards and satellite equipment. Without a very significant price differential, consumers are unlikely to see the advantage in doing so, particularly as the foreign channels are unlikely to be broadcast in English.

For FAPL, the next auction process for future rights was expected to commence at the end of this year. The FAPL has to consider whether it can maintain the current licensing structure based on national territories. The alternative may be to replace it by, for example, selling rights on a pan-European basis or by language.

From the perspective of all content owners, seeking to license and exploit their rights, the decision undoubtedly has an impact on what models they can use. Notwithstanding any exclusive licence into a territory, they will not be able to impose conditions in contracts requiring third parties to restrict importation of decoder cards, thereby undermining the exclusivity. We consider that there are a number of contractual mechanisms which rights-holders may wish to employ to seek to maintain a degree of exclusivity, and these are likely to be tested in the courts over the coming years. Many will try to employ the long-standing distinction between preventing active sales and marketing and banning passive, unsolicited sales, the former being generally considered acceptable under EU competition law.

This case applies in the satellite television context because the satellite signal is capable of reception outside the intended territory, unlike some other distribution media. The other medium where there will potentially be a major impact, perhaps even more so than satellite TV, is in the online and on-demand distribution of content. In that case, there is no requirement for decoding devices, and consumers would not have the disincentive of having to buy new equipment. Instead, rights-holders licensing content for distribution online may be prevented from requiring licensees to geo-block. The ECJ's focus on free movement of services means that territorially-limited licences may be unenforceable, which makes the control of content flow much more difficult.

For further information contact: Paul Stevens, David Zeffman, John Enser, or Howard Cartlidge.