CJEC, October 6, 1982, No 262-81

THE COURT,

1. By order of 3 September 1981, which was received at the court on 30 September 1981, the Belgian Cour de cassation (court of cassation) referred to the court for a preliminary ruling under article 177 of the EEC treaty a question concerning the interpretation of article 85 read in conjunction with article 36 of that treaty.

2. The question arose in the course of proceedings between three Belgian cable television diffusion companies, which are hereinafter referred to jointly as the Coditel companies, appellants in cassation, on the one hand, and a Belgian film distribution company, Ciné-Vog films SA, a French film producing company, les films la Boetie, and other representatives of the cinematographic industry, the respondents in cassation, on the other hand.

3. The action which gave rise to those proceedings was for compensation for the damage which Ciné-Vog alleged it had suffered as the result of the retransmission of the broadcast on German television of the film ' ' Le Boucher ' ', in respect of which Ciné-Vog had acquired exclusive distribution rights in Belgium from les films la Boetie.

4. It is apparent from the file that the Coditel companies provide, with the authority of the Belgian administration, a cable television diffusion service covering part of Belgium. Television sets belonging to subscribers to the service are linked by cable to a central aerial having special technical features which enable Belgian broadcasts to be picked up as well as certain foreign broadcasts which the subscriber cannot always receive with a private aerial, and which furthermore improve the quality of the picture and sound received by the subscribers.

5. The court before which the claim was originally made, the tribunal de premiere instance (court of first instance), Brussels, ordered the Coditel companies to pay damages to Ciné-Vog. The Coditel companies appealed against that judgment, and the Cour d'appel (court of appeal), after holding that article 85 was not applicable to the dispute, submitted to the court of justice two questions which, essentially, raised the problem of whether articles 59 and 60 of the treaty prohibit the assignment, limited to the territory of a member state, of the copyright in a film, in view of the fact that a series of such assignments might result in the partitioning of the common market as regards the undertaking of economic activity in the film industry.

6. By judgment dated 18 march ((1980) ECR 881), the court ruled as follows :

' ' The provisions of the EEC treaty relating to the freedom to provide services do not preclude an assignee of the performing right in a cinematographic film in a member state from relying upon his right to prohibit the exhibition of that film in that state, without his authority, by means of cable diffusion if the film so exhibited is picked up and transmitted after being broadcast in another member state by a third party with the consent of the original owner of the right ' '.

7. However, within the period prescribed by statute for lodging an appeal in cassation, the Coditel companies had appealed to the Cour de cassation against the judgment of the Cour d'appel, claiming inter alia that the latter had erred in holding that article 85 of the treaty was not applicable to the case in point. They maintained, on the one hand, that article 36 could not restrict the scope of application of article 85 and, on the other hand, that if copyright as a legal status did not fall within the class of agreements and concerted practices as envisaged by article 85, its exercise might be the purpose, the means or the result of an agreement, decision or concerted practice and that a contract involving an exclusive licence or an assignment of copyright might amount to an agreement, decision or concerted practice for the purposes of article 85, not only because of the rights and obligations arising from its clauses but also because of the economic and legal circumstances surrounding it and, in particular, because of the existence of any similar agreements concluded between the same parties or even between third parties, and of the cumulative effect of such parallel agreements.

8. The Cour de cassation considered that the above submission raised a question of interpretation of community law and referred the following question to the court :

' ' Where a company which is the proprietor of the rights of exploitation of a cinematographic film grants a contract to a company in another member state an exclusive right to show that film in that state, for a specified period, is that contract liable, by reason of the rights and obligations contained in it and of the economic and legal circumstances surrounding it, to constitute an agreement, decision or concerted practice which is prohibited between undertakings pursuant to the first and second paragraphs of article 85 of the treaty or are those provisions inapplicable either because the right to show the film is part of the specific subject-matter of copyright and accordingly article 36 of the treaty would be an obstacle to the application of article 85, or because of the right relied upon by the assignee of the right to show the film derives from a legal status which confers on the assignee protection erga omnes and which does not fall within the class of agreements and concerted practices referred to by the said article 85?

' '

9. The question essentially seeks to ascertain the position, in relation to prohibitions contained in article 85 of the treaty, of a contract whereby the owner of the copyright in a film grants the exclusive right to exhibit that film within the territory of a member state and for a specified period. More particularly, the question asks whether such a grant may possibly fall outside the scope of article 85 by virtue of the special character attributed to that right by article 36 of the treaty or by its protected status under national law.

10. It should be noted, by way of a preliminary observation, that article 36 permits prohibitions or restrictions on trade between member states provided that they are justified on grounds inter alia of the protection of industrial and commercial property, a term which covers literary and artistic property, including copyright, whereas the main proceedings are concerned with the question of prohibitions or restrictions placed upon the free movement of services.

11. In this regard, as the court held in its judgment of 18 march 1980 (Coditel v Ciné-Vog films (1980) ECR 881), the problems involved in the observance of a film producer ' s rights in relation to the requirements of the treaty are not the same as those which arise in connection with literary and artistic works the placing of which at the disposal of the public is inseparable from the circulation of the material form of the works, as in the case of books or records, whereas the film belongs to the category of literary and artistic works made available to the public by performances which may be infinitely repeated and the commercial exploitation of which comes under the movement of services, no matter whether the means whereby it is shown to the public be the cinema or television.

12. In the same judgment the court further held that the right of the owner of the copyright in a film and his assigns to require fees for any showing of that film is part of the essential function of copyright.

13. The distinction, implicit in article 36, between the existence of a right conferred by the legislation of a member state in regard to the protection of artistic and intellectual property, which cannot be affected by the provisions of the treaty, and the exercise of such right, which might constitute a disguised restriction on trade between member states, also applies where that right is exercised in the context of the movement of services.

14. Just as it is conceivable that certain aspects of the manner in which the right is exercised may prove to be incompatible with articles 59 and 60 it is equally conceivable that some aspects may prove to be incompatible with article 85 where they serve to give effect to an agreement, decision or concerted practice which may have as its object or effect the prevention, restriction or distortion of competition within the common market.

15. However, the mere fact that the owner of the copyright in a film has granted to a sole licensee the exclusive right to exhibit that film in the territory of a member state and, consequently, to prohibit, during a specified period, its showing by others, is not sufficient to justify the finding that such a contract must be regarded as the purpose, the means or the result of an agreement, decision or concerted practice prohibited by the treaty.

16. The characteristics of the cinematographic industry and of its markets in the community, especially those relating to dubbing and subtitling for the benefit of different language groups, to the possibilities of television broadcasts, and to the system of financing cinematographic production in Europe serve to show that an exclusive exhibition licence is not, in itself, such as to prevent, restrict or distort competition.

17. Although copyright in a film and the right deriving from it, namely that of exhibiting the film, are not, therefore, as such subject to the prohibitions contained in article 85, the exercise of those rights may, none the less, come within the said prohibitions where there are economic or legal circumstances the effect of which is to restrict film distribution to an appreciable degree or to distort competition on the cinematographic market, regard being had to the specific characteristics of that market.

18. Since neither the question referred to the court nor the file on the case provides any information in this respect, it is for the national court to make such inquiries as may be necessary.

19. It must therefore be stated that it is for national courts, where appropriate, to make such inquiries and in particular to establish whether or not the exercise of the exclusive right to exhibit a cinematographic film creates barriers which are artificial and unjustifiable in terms of the needs of the cinematographic industry, or the possibility of charging fees which exceed a fair return on investment, or an exclusivity the duration of which is disproportionate to those requirements, and whether or not, from a general point of view, such exercise within a given geographic area is such as to prevent, restrict or distort competition within the common market.

20. Accordingly, the answer to be given to the question referred to the court must be that a contract whereby the owner of the copyright in a film grants an exclusive right to exhibit that film for a specific period in the territory of a member state is not, as such, subject to the prohibitions contained in article 85 of the treaty. It is, however, where appropriate, for the national court to ascertain whether, in a given case, the manner in which the exclusive right conferred by that contract is exercised is subject to a situation in the economic or legal sphere the object or effect of which is to prevent or restrict the distribution of films or to distort competition within the cinematographic market, regard being had to the specific characteristics of that market.

Costs

21. The costs incurred by the united kingdom, the government of the French republic, the government of the kingdom of the Netherlands and the commission of the European communities, which have submitted observations to the court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, costs are a matter for that court.

On those grounds ,

The court

In answer to the question referred to it by the Belgian Cour de cassation, by order of 3 September 1981, hereby rules :

A contract whereby the owner of the copyright for a film grants an exclusive right to exhibit that film for a specific period in the territory of a member state is not, as such, subject to the prohibitions contained in article 85 of the treaty. It is, however, where appropriate, for the national court to ascertain whether, in a given case, the manner in which the exclusive right conferred by that contract is exercised is subject to a situation in the economic or legal sphere the object or effect of which is to prevent or restrict the distribution of films or to distort competition on the cinematographic market, regard being had to the specific characteristics of that market.