5.  The applicant organisation, SIA AKKA/LAA (SIA “Autortiesību un komunicēšanās konsultāciju aģentūra/Latvijas Autoru apvienība” –Copyright and Communication Consulting Agency ltd./Latvian Authors Association) is a non-profit organisation founded in Riga by a separate non‑profit organisation, the Latvian Authors Association, whose members are various Latvian artists.
6.  At the end of the 1990s the applicant organisation, acting as a representative of approximately 2000 domestic and two million international authors who had entrusted the applicant organisation to manage the copyright of their musical works, was concluding licence agreements with several broadcasters in Latvia. From 1998 to 1999, after the expiry of the previous licence agreements, the applicant organisation and certain broadcasting organisations in Latvia could not reach an agreement on the terms of the future licence agreements, especially with regard to the remuneration to be paid for the broadcasting of music. As a result some broadcasting organisations continued to use the protected musical works without a written agreement, either without paying any remuneration or paying the amount the broadcasting organisations unilaterally considered equitable. In 2002 the applicant organisation instituted civil proceedings against several broadcasters operating in Latvia.
7.  In July 2002 the applicant organisation lodged a claim against a private radio station, Radio SWH, and requested that the Riga Regional Court, acting as a first-instance court, recognise that by broadcasting protected musical works without a valid licence agreement between 1 January 1999 and 31 December 2001, the defendant had violated economic interests of the authors represented by the applicant organisation. The applicant organisation further asked that the court award compensation for unauthorised use of musical works. By relying on the authors’ exclusive rights to control the use of their musical works, the applicant organisation asked the court to apply an injunction precluding the defendant from using the authors’ works before a valid licence agreement between the parties had come into effect.
8.  The defendant lodged a counterclaim arguing that the applicant organisation had abused its dominant position and had fixed an unreasonably high royalty rate, which was six times the rate which had been applicable for the period from 1995 to 1998. They asked the court to order the applicant organisation to conclude a licence agreement with the defendant organisation and to lay down an equitable royalty rate.
9.  During the first-instance court’s hearing, the applicant organisation admitted that the parties had a dispute over the royalty rate in the draft licence agreement negotiated by the parties, but that the court was precluded under section 41 of the Copyright Law from setting the rate as long as there was no licence agreement concluded between the parties (see paragraph 26 below).
10.  On 16 January 2003 the first-instance court partly upheld the claim and fully upheld the counterclaim. It established that between 1 January 1999 and 31 December 2001 the defendant had infringed the authors’ rights by broadcasting the protected works without authorisation, contrary to the provisions of the Copyright Law. The first-instance court ordered the defendant to pay to the applicant organisation compensation for the above period in the amount of 78,000 Latvian lats (LVL, equivalent to 111,500 euros (EUR)), which was 1.5% of the defendant’s net turnover over this period.
11.  Furthermore, the first-instance court ordered the applicant organisation to conclude a licence agreement with the defendant for the next three-year period with a royalty rate set at 2% of the defendant’s monthly net turnover (ikmēneša neto apgrozījums).
12.  Lastly, by relying on the preamble of the WIPO Copyright Treaty and Articles 11 and 11bis of the Berne Convention (see paragraph 37 below), the first-instance court dismissed the applicant organisation’s application to have an injunction granted to prohibit the defendant from broadcasting works of the rightsholders represented by the applicant organisation. By referring to the testimonies of two authors represented by the applicant organisation, the first-instance court concluded that the authors themselves were interested in their musical works being publicly broadcasted. An interdiction on broadcasting of the musical works would infringe the authors’ exclusive rights to have their work reproduced, as well as it would negatively affect the interests of the society to listen to music.
13.  On 23 October 2003 the Civil Cases Chamber of the Supreme Court, acting as an appellate court, upheld the part of the first-instance judgment concerning the compensation for copyright infringement and the injunction.
14.  On the issue of ordering the conclusion of a licence agreement, the appellate court observed that both parties had expressed their intention to enter into a such an agreement, as attested by a draft licence agreement of 7 October 2003 in which the parties had agreed on certain terms and conditions such as the duration of the licence and the income from which royalties should be calculated. The appellate court noted that it was partly due to the applicant organisation’s inconsistent negotiating that a licence agreement could not be concluded. The appellate court accordingly recognised that the licence agreement was to be considered concluded in the wording as agreed by the parties on 7 October 2003. On the question of remuneration, the appellate court established that in the negotiation process the applicant organisation had changed the royalty rate from 6% to 4% and then to 3.5%, whereas the defendant had insisted on 1.6% of the income from which royalties should be calculated. The appellate court took note of the characteristics of the defendant’s activities and concluded that an equitable remuneration would be 2% of the income from which, as agreed by the parties, the royalties should be calculated.
15.  On 11 February 2004, following an appeal on points of law, the Senate of the Supreme Court upheld the appellate court’s findings that after the expiry of the earlier licence agreement on 31 December 1998 the de facto contractual relationship between the parties had continued mainly owing to the fact that the applicant organisation had failed to reach an agreement with the defendant on the terms of the licence agreement. The Senate of the Supreme Court further observed that the parties did not contest that the authors had a right to receive equitable remuneration, but that to that day the parties had not reached an agreement on the rate of the royalty payments. Given that there was no other authority responsible to decide on this matter, the Senate of the Supreme Court concluded that pursuant to Article 11bis of the Berne Convention and section 5 of the Civil Law, it was within the court’s competence to set the royalty rate. The Senate of the Supreme Court also dismissed the allegations that the appellate court’s judgment had infringed the intellectual property rights protected under the Constitution of the Republic of Latvia.
16.  In their claim against Latvijas Radio, a state-owned limited liability company, the applicant organisation asked the Riga Regional Court, acting as a first-instance court, to find that by broadcasting the rightsholders’ musical works without a valid licence agreement between 1 January 2000 and 31 December 2001, the defendant had violated economic interests of the authors represented by the applicant organisation. The applicant organisation further asked that the court award compensation for unauthorised use of musical works. By relying on the authors’ exclusive rights to control the use of their musical works, the applicant organisation asked the court to apply an injunction precluding the defendant from using the authors’ works before a valid licence agreement between the parties had come into effect.
17.   By lodging a counterclaim the defendant in essence asked the court to recognise that in the disputed period the parties had a de facto contractual relationship.
18.  On 2 April 2003 the Riga Regional Court dismissed the applicant organisation’s claim and upheld the counterclaim. The court established that even though the licence agreement concluded between the parties with the royalty rate set at 3.2% of the defendant’s annual income had expired in 1999, the applicant organisation had continued receiving royalty payments from the defendant, which continued to pay at a lower rate. Given that the applicant organisation had not referred to objections to the broadcasting of the musical works, the existence of a de facto contractual relationship between the parties had been proven. Relying on section 41 of the Copyright Law the court set the royalty rate from 2000 to 2001 at 1.57% of the defendant’s annual income.
19.  On 26 November 2003 the Civil Cases Chamber of the Supreme Court, acting as an appellate court, diverted from the first-instance court’s findings and recognised that the defendant had infringed copyright by broadcasting the musical works over a prolonged period of time without a valid written licence agreement. It awarded the applicant organisation compensation in the amount of LVL 100,000 (EUR 143,000), which exceeded the amount the defendant had paid under the expired licence agreement. It considered that it would be fruitless to issue an injunction prohibiting the defendant from broadcasting the works. The appellate court observed that in principle the parties had expressed their interest in concluding a licence agreement but that before and during the court proceedings the parties had not agreed on the equitable royalty rate. It also pointed to the applicant organisation’s responsibility in failing to reach an agreement in the negotiation of a new licence. As a result, over a prolonged period of time the authors’ rights had been unprotected. As the parties had not asked the court to decide on the exact terms and conditions of a licence agreement, the appellate court decided to impose on the parties a general obligation to conclude a licence agreement by 1 March 2004. Given that the parties had been unable to agree on a royalty rate, the appellate court set the rate at 3% of the defendant’s net turnover. In reaching this conclusion the appellate court took into consideration such elements as, inter alia, the royalty rate set in other court proceedings and the existing practice in certain other EU member States.
20.  The applicant organisation appealed on points of law arguing that by, inter alia, ordering the parties to conclude a licence agreement and setting its terms, the court had overstepped its powers and acted in breach of section 11bis of the Berne Convention and section 15 of the Copyright Law.
21.  On 17 March 2004 the Senate partly upheld the lower court’s judgment with similar reasoning as in the first set of proceedings.