To pay or not to pay

A hotel operator who broadcasts phonograms into guests’ rooms must pay equitable remuneration to the producers of such phonograms. The same does not apply to a dentist who broadcasts phonograms in his private clinic where he practices his profession. This distinction as to when the producer of a phonogram is entitled to his dues and when not, has been recently made by the European Court of Justice in two distinct cases which came before it.

The Maltese Copyright Act safeguards the rights of the producers of phonograms in Malta- Mariosa Vella Cardona

A phonogram refers to any exclusive aural fixation of sounds of a performance or of other sounds. EU law obliges member states to provide, in their national laws, for a right to a single equitable remuneration for producers of phonograms published for commercial purposes. Such remuneration is to be paid by any person who broadcasts such phonograms or in any way communicates them to the public. On the other hand, no remuneration is due for the private use of such phonograms.

A collecting society which represents the rights of phonogram producers in Ireland filed a case in the national courts against the Irish government, claiming that Ireland had acted in breach of EU law by exempting hotel operators from the obligation to pay equitable remuneration for the use of phonograms in hotel bedrooms in Ireland. The Irish court requested guidance on the matter from the European Court of Justice.

The ECJ primarily considered whether a hotel operator which provides in guest bedrooms, televisions and/or radios to which it distributes a broadcast signal, is a “user” making a “communication to the public” of a phonogram. The court asserted that the concept of “communication to the public” requires an individual assessment and several criteria need to be taken into consideration simultaneously. One has to focus first and foremost on the indispensable role of the user.

The court concluded that a person makes a communication to the public when he intervenes, in full knowledge of the consequences of his actions, to give access to a broadcast containing the protected work to its customers. The term “public” was taken by the court to refer to an indeterminate number of potential listeners and a fairly large number of persons. The profit-making nature of the “communication to the public” was also considered to be a relevant criterion. The public must be both targeted by the user and receptive, in one way or another, to that communication, and not merely “caught” by chance.

The court concluded that all these criteria were fulfilled in the case of the role played by a hotel operator who broadcasts a phonogram into guest bedrooms as well as by the hotel guests as the public. It maintained that the broadcasting of phonograms by a hotel operator is of a profit-making nature since such broadcasting constitutes an additional service which has an influence on the hotel’s standing and, therefore, on the price of rooms. It is also likely to attract additional guests who are interested in such additional service.

Consequently, a hotel operator is obliged to pay equitable remuneration for the broadcast of a phonogram, in addition to that paid by the broadcaster. This is so since such an operator is using the phonogram in an autonomous way and transmitting it to a public which is distinct from and additional to the one targeted by the original act of communication of the broadcaster. Moreover, the hotel operator derives economic benefits from that transmission which are independent of those obtained by the broadcaster or the producer of the phonograms.

The court continued to provide that a hotel operator who does not provide guest bedrooms with televisions and/or radios, but other apparatus and phonograms in physical or digital form which may be played on or heard from such apparatus, is also a “user” making a “communication to the public” of a phonogram. Such a hotel operator is therefore also obliged to pay “equitable remuneration” for the transmission of such phonograms.

The court therefore concluded that though EU law provides for a limitation to the right to equitable remuneration in the case of “private use”, it does not allow member states to exempt a hotel operator which makes a “communication to the public” of a phonogram from the obligation to pay such remuneration. The court clarified that it is not the private nature or otherwise of the use of the work by guests of a hotel which is relevant in order to determine whether a hotel operator may rely on the limitation based on “private use” but whether the use made of the work by the operator itself is private or not.

On the other hand, in another case involving a dentist who broadcast phonograms free of charge in his private dental practice, the ECJ came to a totally different conclusion. Whilst applying the same criteria identified in the afore-mentioned case, the court concluded that a dentist who broadcasts phonograms free of charge in his dental practice, is not making a “communication to the public”. Although such a dentist intervenes deliberately in the broadcasting of phonograms, his patients generally form a very consistent group of persons and constitute a determinate circle of potential recipients.

The court held that, in the case of a dentist’s patients, the number of persons targeted is not large, since the number of persons present in the clinic is usually very limited. Indeed, although there are a number of patients in succession, such patients attend the clinic one at a time and they do not generally hear the same broadcast phonograms. Furthermore, the court asserted that such a broadcast is not of a profit-making nature. The patients of a dentist visit his clinic with the sole objective of receiving treatment, and the broadcasting of phonograms is surely not a part of dental treatment. They have access to certain phonograms by chance and without any active choice on their part.

The Maltese Copyright Act safeguards the rights of the producers of phonograms in Malta. The pecuniary benefits reaped from the protection that the law affords to intellectual property, serve to incentivise the intellectual property right holder to invest in further innovation and research. Free riding serves to dampen down any such incentives and this to the detriment of consumers and the economy alike.

mariosa@vellacardona.com

Dr Vella Cardona is a practising lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is the deputy chairman of the Malta Competition and Consumer Affairs Authority as well as a member of the National Commission for the Promotion of Equality.