No violation of Melita’s rights in sale of cards and decoders

The First Hall of the Civil Court, presided over by Madame Justice Abigail Lofaro, on April 20, 2012, in the case “The Football Association Premier League Ltd and Melita plc vs Telestarr Ltd ” held, among other things, that once FAPL did not have rights of copyright over the transmission of the UK Premier football league, there was nothing prohibiting Telestarr from selling decoders in Malta.

The facts in this case were as follows.

FAPL cannot hold copyrights in the live football matches because they cannot be classified as works … To be so classified, the subject-matter concerned would have to be original in the sense that it would be its author’s own intellectual creation ...

The foreign company, The Football Association Premier League Ltd (FAPL) and Melita plc filed legal proceedings for damages against Telestarr Ltd.

FAPL said that it was the owner of the footage rights of the UK Premier League. It licensed entities around the world to transmit football matches under certain terms and conditions.

In Malta, it licensed Melita. One condition was that the licensed entities could only broadcast the games within their territory.

Melita had exclusivity only within its territory, Malta. It resulted that FAPL and Melita had discovered that Telestarr sold satellite cards such as Sky (UK), Sky Italy, TP5, ART and Digi Alb to consumers and this allegedly in violation of their rights.

After FAPL and Melita filed a judicial protest against Telestarr, the parties entered negotiations to reach an out-of -court settlement, without success.

FAPL and Melita claimed to have suffered serious damages. They requested the First Hall of the Civil Court to declare the acts of Telestarr as having violated their rights; to declare that they suffered damages and to condemn Telestarr to pay them compensation.

In reply, Telestarr contested the claims against it. It submitted that FAPL had to prove that it was the exclusive owner of the footage rights of the Premier League games.

Telestarr put forward the argument that:

• It had no contractual commitments with FAPL and Melita;

• It acted legally, in good faith and it could not therefore be held responsible for damages;

• Both FAPL and Melita had to show what damages they had suffered and that such damages were caused by its acts;

• It was not possible for FAPL and Melita to use as evidence matters which were raised in the “without prejudice” negotiations.

On April 20, 2012, the First Hall of the Civil Court decided against FAPL and Melita. It confirmed that the legal action against Telestarr was unfounded in fact and at law.

The court found that Telestarr had acted legally and in good faith, and that it should not be held liable for damages.

It refused to consider as evidence matters that were raised during the “without prejudice” negotiations. Both FAPL and Melita had failed to show what damages Telestarr had caused them, said the court.

The court gave the reasons for its decision.

Rights of footage: FAPL had the right to authorise entities worldwide to show the UK Premier League. There was no doubt that Melita was so authorised in Malta.

Copyright: FAPL based its case on Article 43(1) of Chapter 415 which provides that where any person infringes the copyright, neighbouring rights or sui generis rights in respect of a work, he shall be liable, at the suit of the copyright owner or right holder, to be condemned by the First Hall of the Civil Court to the payment of damages or to the payment of a fine.

This is to be determined in accordance with a scale of fines to be prescribed by the minister, as the said court, having regard to the circumstances of the case, may deem proper and to the restitution of all the profit derived from the infringement of the copyright, neighbouring rights or sui generis rights:

Provided that where the defendant proves to the satisfaction of the court that at the time of the infringement he was not aware and could not reasonably be expected to be aware that copyright, neighbouring rights or sui generis rights subsisted in the work to which the action relates, the court shall not condemn him to the restitution of the profit.

Reference was made to European Court of Justice decision in K. Murphy vs Media Protection Services Ltd where the court held “FAPL cannot hold copyrights in the live football matches since they cannot be classified as works…

“To be so classified, the subject-matter concerned would have to be original in the sense that it would be its author’s own intellectual creation …

“However, sporting events cannot be regarded as intellectual creations, and football matches ... which are subject to rules of the game, leave “no room for creative freedom”.

The court noted that FAPL did not have copyright on football matches and could not therefore suffer any violation of rights, as claimed.

Melita’s exclusivity in Malta: In the context of author’s rights vis-à-vis the freedom to provide services, Melita argued that such restrictions were justified for the purpose of protecting intellectual property rights.

In the K. Murphy case, K. Murphy, an owner of a pub, had been fined for using a Greek decoder card to avoid the controls imposed by FAPL.

The European Court of Justice had held that such restrictions were illegal and in violation of article 56 TFEU. Exceptions were permissible only “to the extent to which they are justified for the purpose of safeguarding the rights which constitute the specific subject-matter of the intellectual property concerned”.

The prohibition of foreign decoders went beyond what was necessary to safeguard the rights of remuneration. “Appropriate remuneration” did not mean “the highest possible remuneration”.

The court said that although it was proven that Melita enjoyed exclusive rights of transmission, this exclusivity would be in accordance with the law insofar as it safeguarded the author’s rights.

The court noted that FAPL did not enjoy rights of copyright. Melita was not entitled to prohibit the transmission in order to protect the rights of the author, maintained the court. Once FAPL did not have copyright, there was nothing prohibiting Telestarr from selling decoders in Malta.

The protection of the rights of the author arose from law and it was not relevant to consider whether Telestar had contractual obligations with FAPL and Melita, pointed out the court.

Good faith: The court felt that Telestarr had acted in good faith. The decoders had been imported legally into Malta.

Damages: Once there was no breach of the author’s rights as regards the transmission of football, there could be no issue of damages.

Without-prejudice negotiations: This meant that what had been stated in the course of negotiations could not be used against them in a court of law. Settlement was one way to extinguish obligations; re: Article 1718 (1) of the Civil Code.

It was clear that what was stated during negotiations on a without-prejudice basis could not be produced as evidence. This rule was based on public order.

Reference was made to L.J. Oliver and L.J. Fox in the case Cutts vs Head and another.

L.J. Oliver writes: “That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy.

“It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) … may be used to their prejudice in the course of the proceedings.

“They should be encouraged fully and frankly to put their cards on the table.

“The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability” and must be read as creating a situation of mutuality which enables both sides to take advantage of the “without prejudice” protection.

“The juridical basis of that must, I think, in part derive from an implied agreement between the parties and in part from public policy.

“As to the former, Bowen L.J. in Walker vs Wilsher, 23 QBD 335, after the passage against compromises, went on to say, at p.339: “The agreement that the letter is without prejudice ought, I think, to be carried out in its full integrity.”

“Cutts vs Head shows that the rule has two justifications. Firstly, the public policy of encouraging parties to negotiate and settle their disputes out of court and, secondly, an implied agreement arising out of what is commonly understood to be the consequences of offering or agreeing to negotiate without prejudice.

“In some cases both of these justifications are present; in others, only one or the other.”

For this reason the court refused to consider as evidence documents produced in the course of the out-of-court settlement negotiations.

Dr Grech Orr is a partner at Ganado & Associates.