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Wednesday, 29 April 2009

IP licences "not contracts for the provision of services", rules ECJ

The IPKat would have missed reporting on Case C‑533/07 Falco Privatstiftung and Thomas Rabitsch v Gisela Weller-Lindhorst if it had not been for a timely nudge from Daan de Lange (Brinkhof). Although this ruling of the Court of Justice of the European Communities, on a reference from the Oberster Gerichtshof (Austria), has IP at its core, it was cunningly camouflaged on the Curia website as a decision in the "Area of Freedom, Security and Justice".

What was this case about? In proceedings initiated in Austria, the body which administered the copyright of the late Austrian rock and rap star Falco, and Rabitch (F&R), sought from Weller-Lindhorst (WL), who was domiciled in Germany, the payment of royalties, calculated by reference to (i) the partly-known amount of sales of video recordings of a concert, (ii) an account of all sales of video and audio recordings and (iii) payment of the supplementary royalties. As to the video recordings, F&R's claim was based on the tems of a contract; the claim regarding the audio recordings was founded in copyright infringement.

The Commercial Court, Vienna, held that it had jurisdiction to rule on the copyright infringement claims, under Article 5(3) of Regulation 44/2001 on jurisdiction etc in civil and commercial matters. The court added that, given the close link between the rights relied on, its jurisdiction also covered the fees owed for the video recordings under the contract, a finding against which WL appealed. On appeal, the Higher Regional Court, Vienna, held that Article 5(3) of Regulation 44/2001, which covered torts such as copyright infringement, was not applicable to contractual rights, nor was the second indent of Article 5(1)(b) applicable, since the contract in question -- being a copyright licence -- was not a contract for the provision of services within the meaning of that provision.

An appeal on a point of law was then made to the Oberster Gerichtshof concerning only the contract claims in relation to the distribution of the video recordings. That court stayed the proceedings and referred the following questions to the Court for a preliminary ruling:

"1. Is a contract under which the owner of an intellectual property right grants the other contracting party the right to use that right (a licence agreement) a contract regarding “the provision of services” within the meaning of Article 5(1)(b) of [Regulation No 44/2001]?

2. If Question 1 is answered in the affirmative:

(a) Is the service provided at each place in a Member State where use of the right is allowed under the contract and also actually occurs?

(b) Or is the service provided where the licensor is domiciled or at the place of the licensor’s central administration?

(c) If Question 2(a) or Question 2(b) is answered in the affirmative, does the court which has jurisdiction also have the power to rule on royalties which result from use of the right in another Member State or in a third country?

3. If Question 1 or Questions 2(a) and 2(b) are answered in the negative: is jurisdiction as regards payment of royalties under Article 5(1)(a) and (c) of [Regulation No 44/2001] still to be determined in accordance with the principles which result from the case-law of the Court of Justice on Article 5(1) of the [Brussels Convention]?".
Last Thursday the Court of Justice issued its answers:
"1. The second indent of Article 5(1)(b) of Council Regulation ... 44/2001 ... is to be interpreted to the effect that a contract under which the owner of an intellectual property right grants its contractual partner the right to use that right in return for remuneration is not a contract for the provision of services within the meaning of that provision.

2. In order to determine, under Article 5(1)(a) of Regulation No 44/2001, the court having jurisdiction over an application for remuneration owed pursuant to a contract under which the owner of an intellectual property right grants to its contractual partner the right to use that right, reference must continue to be made to the principles which result from the case-law of the Court of Justice on Article 5(1) of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters, as amended by the Convention of 26 May 1989 on the Accession of the Kingdom of Spain and the Portuguese Republic".
The IPKat says there's nothing shocking about this decision. It's pretty much a matter of "business as usual". The interesting question, though, arises where a contract is both an intellectual property licence and a contract for the provision of services, such as a combined patent, know-how and technical consultancy package, since it would usually be undesirable for a court in one country to be able to exercise jurisdiction over some of the content of the agreement while a court in another country took jurisdiction to deal with other aspects of it.

Merpel notes that this is another "swiftie". The reference for a ruling was made in November 2007 and the Advocate General's Opinion was issued this January, making just 17 months from start to finish: well done! It's a shame this dispute has taken so long to get this far though -- the original concert that led to the litigation took place in 1993.

More on Falco here and here
Rock me Amadeus here


Birgit said...

Many thanks to Daan de Lange for finding this. ("Alles klar, Herr Kommissar")

Anonymous said...

This falls completely outside my area of expertise, and pardon me if I sound utterly ignorant to the ears of competition lawyers, but couldn't this decision have an impact in the Competition DG's handling of IP, in particular patent licences? I'd understood that behind much of their recent reasoning with respect to IP rights there was the idea that the markets for IP rights and for the goods/services protected by those IP rights were different and distinct, and that competition law should prevent that dominance of an "upstream" market (the IP rights) should lead to dominance of the "downstream" market (the goods/services protected by those IP rights). Such considerations could possibly lead, under certain circumstances, to compulsory licensing.

Now, if an IP licence had been considered "a contract for the provision of services", this would have strengthened the EC's position by identifying the IP market as a distinct market for services. A patent licence for a particular gizmo would be a service, something clearly different from the goods (the gizmo) protected by the patent.

But, if an IP licence is not a contract for the provision of services, then what is it? And can it really be considered separately from the goods/services protected by the IP right, as the Competition DG seems to be doing these days?

And, possibly more importantly in the eyes of the member states' tax authorities: can VAT be levied on it?

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