Opinion of Mr Advocate General Lenz delivered on 24 February 1987. - G. Basset v Société des auteurs, compositeurs et éditeurs de musique (SACEM). - Reference for a preliminary ruling: Cour d'appel de Versailles - France. - Copyright management - Disparities between national laws. - Case 402/85.



European Court reports 1987 Page 01747



Opinion of the Advocate-General

++++

Mr President,

Members of the Court,

A - Facts

1 . These proceedings, brought before us on a reference by the cour d' appel, Versailles, concern the interpretation of Articles 30 and 36 of the EEC Treaty on the one hand and of Article 86 on the other, in relation to the fact that Sacem, the French copyright-management society, charges discotheques a "supplementary mechanical reproduction fee" on the use of records from other Member States .

2 . The following points are relevant in that regard .

3 . Under the French Law of 11 March 1957 on literary and artistic property the right of exploitation held by the author of a work comprises the right of performance on the one hand ( that is to say, the direct communication of the work to the public and, according to the case-law and to a statute of 3 July 1985, the public playing of recorded music ) and the right of reproduction on the other ( that is to say, the material fixation of the work by a method permitting indirect communication to the public ). The law expressly provides that the assignment of the right of performance does not imply the assignment of the right of reproduction, and vice versa . In Article 31 of the law it is also expressly provided that in the event of the transfer of the copyright the extent and purpose of the use to which the work may be put must be defined . Accordingly, when the right of reproduction is assigned ( generally to manufacturers of recordings, in return for a reproduction fee ) it is expressly provided that recordings may only be marketed for private use . If a recording of a work is played in public, therefore, not only a performance royalty but also the abovementioned supplementary reproduction fee become payable .

4 . Elsewhere in the Community that legal position prevails only in Belgium, by virtue of case-law; under the law of the other Member States the right of reproduction is exhausted when it is transferred to a manufacturer of recordings, and when recordings are played in public only a performance royalty is payable .

5 . In France, copyrights are administered by Sacem, a society composed of authors, composers, music publishers, sound-recording manufacturers and artists . It looks after works of its members and also those of foreign copyright societies with which it has reciprocal but non-exclusive representation agreements . Its subsidiary SDRM ( Société pour l' administration du droit de reproduction méchanique des auteurs, compositeurs et éditeurs ) is responsible for the exploitation of rights of reproduction; however, the supplementary mechanical reproduction fee payable on the public use of sound recordings is collected by Sacem, acting as agent .

6 . Sacem enters into contracts with users of musical works, inter alia discotheques, providing for the payment of fees calculated according to the importance of the music in the user' s activities . In the case of discotheques it requires 8.25% of their receipts, composed of a performance fee of 6.6% and a supplementary mechanical reproduction fee of 1.65% ( that breakdown, however, is not expressly made in the contracts ).

7 . Since 1974 the plaintiff in the main proceedings has operated a discotheque in Fréjus, in which he plays records the rights to which are held by Sacem . These two parties entered into legal proceedings, which were referred by the cour de cassation to the cour d' appel, Versailles . The latter court has referred to us the question whether Articles 30 and 36 or Article 86 of the EEC Treaty prevent Sacem from charging the abovementioned "supplementary mechanical reproduction fee ".

8 . For further details of the background to the main proceedings, the order of the national court, the wording of the preliminary questions and the written observations submitted to the Court reference may be made to the Report for the Hearing . In so far as is necessary I shall deal with the remarks made at the hearing in my Opinion .

B - Opinion

9 . My views on the issues referred to us are the following :

I - Question 1

1 . 10 . In the course of the proceedings, as the Court will recall, the view was expressed that Article 30 of the EEC Treaty was not relevant, since the French legislation in question, concerning the charging of a fee for the public playing of recorded music, relates only to the provision of services . Doubts as to the applicability of Article 30 in such circumstances were also raised with regard to the fact that that legislation does not concern trade and the importation of goods, it has nothing to do with the free movement of goods and above all the crossing of frontiers is entirely irrelevant . It was also argued that the fact that the fee in question applies without distinction to domestic products and imported recordings implies that Article 30 is not applicable .

11 . I have begun by summarizing those arguments because it is my impression that the problem raised in the main proceedings cannot really be dealt with in that manner; these arguments are clearly based on an excessively narrow view of Article 30 .

12 . As is well known, the Court has consistently held that Article 30 applies to any measure which is capable of hindering intra-Community trade, directly or indirectly, actually or potentially ( see for example the judgment of the Court in Case 229/83 ( 1 )). In its view it is the effects of a measure on trade which are of key significance for the application of Article 30 . Restrictive effects - indeed, effects of all kinds - can arise from legislation concerned with matters other than trade and imports, as the Court' s case-law clearly shows . Nor can such restrictions be excluded in the case of legislation regarding the provision of services, in particular where sound recordings, that is to say goods for the purpose of the Treaty, play a significant role ( as, for instance, in the playing of music in discotheques ).

13 . It is equally clear, moreover, that the mere fact that legislation affects imported and domestic products in the same manner is not sufficient to avoid the application of Article 30 . Reference may be made in that regard to the judgment in Case 130/80 ( 2 ) ( concerning a regulation of general application laying down limits for the quantity of dry matter in bread ); reference may also be made to the price regulations at issue in Joined Cases 16 to 20/79 ( 3 ) and Case 231/83, ( 4 in which it was necessary to determine whether prices were set in such a manner that the competitive advantage of imported goods was neutralized . With regard to the issues raised in the main proceedings, however, it cannot be denied that should the charging of the supplementary mechanical reproduction fee be ruled unlawful - on the basis of considerations relating to the actual subject-matter of copyright and its exhaustion in the event of lawful reproduction in a foreign country - the effect could be that because of their price advantage such sound recordings could become more attractive to users and imports could thus increase . Conversely, it would also mean that the charging of the fee might affect imports and that there might be grounds for applying Article 30 even though the fee is charged in respect of both imports and domestic goods without distinction .

2 . 14 . If, on the other hand, it is recalled that in its order the national court expressly stated that the amount of the combined fee ( 8.25% of income ) was not to be regarded as unreasonable, and that it was also stated that the plaintiff had acknowledged that the charging of a flat rate was legitimate ( in particular since Article 35 of the French Law expressly provides for flat-rate calculations ), there is some foundation for the view that Article 30 does not in fact apply in circumstances such as those of the main proceedings .

15 . ( a ) Thus the Commission expressed the view that should it be held that the supplementary mechanical reproduction fee was not permissible under Community law and must therefore be eliminated, at least with regard to imports, Sacem would in all probability continue to demand 8.25% of their income from discotheques ( as it could easily do in the light of the relative strength of the parties ) as performance royalty alone . No legal objection could be made to such a course of action, since that part of the copyright is certainly not exhausted by the manufacture and marketing of sound recordings in another Member State . The elimination of the supplementary mechanical reproduction fee would not, therefore, in the end work to the benefit of imported sound recordings; looked at in those terms, it cannot be assumed that they would become more attractive from the point of view of price and that patterns of trade would be influenced accordingly .

16 . In my view it cannot be denied that that approach has something to be said for it . Nor can it be objected, as Sacem suggested at the hearing, that such a change would not be entirely without difficulty since the different components of the fee reflect rights owned by different persons ( in its written observations the Commission explained the manner in which the fee is divided, under which the larger part goes to the publishers; its statement in that regard was not contradicted ). That is to say, I think it is relevant that the contracts entered into by Sacem concerning the use of records provide for a single composite fee . How that fee is divided among the copyright holders is a matter for the copyright-management society alone, and it will certainly have no difficulty in determining the portion to which each party is entitled, irrespective of whether its calculation is based on the composite fee or on its components .

17 . ( b ) It must also be recalled that the fees payable by discotheques and other users of sound recordings can only be calculated on a flat-rate basis, and that that is expressly provided for in the French Law of 11 March 1957 . Consequently, it would be difficult to conclude that any elimination of the supplementary mechanical reproduction fee ( for imported sound recordings, on the basis of considerations of copyright ) would have the effect of encouraging individual users to purchase such records and thus influence patterns of trade . If, that is to say, the fee were eliminated in respect of such recordings, with the result, because of the proportion of imported recordings in a discotheque' s stock, that the supplementary mechanical reproduction fee was collected only to a reduced extent ( that is to say, only for domestic sound recordings ), that could not be determined on an individual basis . It would instead be necessary either to work on the basis of general sales statistics and assume that the use of imported sound recordings in discotheques followed the same pattern or establish average figures on the use of imported sound recordings on the basis of a sample of individual discotheques, and no objection could be made to such a course of action . As the Commission correctly emphasized, the only result of such a change would thus be that transfers to foreign copyright societies would be diminished by a corresponding amount, and it is not clear that it would influence the purchasing decisions of individual discotheque proprietors and thus affect patterns of trade .

18 . ( c ) Finally, it must also be pointed out that the most important consideration for discotheque operators in making their arrangements is the music preferred by the public ( that is, as the plaintiff in the main proceedings has stated, music from English-speaking countries and from Italy ). Purchasing decisions are obviously made accordingly; it seems highly questionable whether a certain financial advantage arising out of the elimination of the supplementary mechanical reproduction fee in respect of the use of imported sound recordings would play any role . Even if it were assumed, therefore, that a change in the calculation method could have some influence on the purchasing decisions of discotheque owners, it can hardly be concluded that any such influence would be of sufficient importance in relation to decisions clearly based primarily on taste as to affect patterns of trade .

19 . ( d ) Let me add for the sake of completeness that if there is therefore a strong foundation for the view that the charging of the supplementary mechanical reproduction fee should not be regarded as a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 30, there is certainly nothing to be achieved by reference to the judgment in Joined Cases 55 and 57/80, ( 5 ) to which the plaintiff clearly attached considerable weight, in part because it was mentioned by the French commission de la concurrence ( Competition Committee ) in its opinion of 19 June 1986 . The circumstances are too different in nature .

20 . That case concerned direct interference with imports ( by the charging, by the German copyright-management society, of a supplementary licence fee on sound recordings from other Member States ) and thus a direct influence on sales of goods ( not merely, as in this case, a conceivable indirect effect by way of the purchasing decisions of domestic customers, which are normally made after goods have been imported ). The key point, moreover, was that the German copyright-management society relied on the right assigned to it ( the right of reproduction ), although the relevant case-law in related areas led to the conclusion that that right could be regarded as exhausted once the product had been put into circulation in another country with the authorization of the author or composer .

21 . This case, on the other hand, is concerned not with the exercise of a right which has already been exhausted in another Member State ( that is to say, the right of reproduction ), but - in spite of its misleading name, which was presumably chosen in view of its beneficiaries - a right similar to the right of performance which has not yet been used in the foreign country and which comes into play each time the recording is used .

22 . For the purposes of this case, therefore, no direct inference can be made from the judgment referred to . That ruling would have to be significantly extended and modified in order for the issues now before us to be dealt with in a corresponding manner . It must now be examined whether there are compelling grounds for such an extension .

3 . 23 . In my view - here I anticipate my conclusion - there are in fact no significant reasons for recommending such a step . Even if it were necessary to assume that Article 30 is in principle applicable in this case, I think there are important considerations which weigh against the conclusion that the charging of a supplementary mechanical reproduction fee on the use of imported records is contrary to the Treaty .

24 . ( a ) First of all, Sacem correctly relied in this regard on Article 36 ( which is expressly referred to in the first question ), under which the restriction of trade may be justified inter alia on grounds of the protection of industrial and commercial property .

25 . As was made clear in the judgment referred to, copyright falls under that description . The key issue in that respect has consistently - and quite correctly - been whether the exercise of the right, and its effects on trade, relate to the specific subject-matter of the industrial property right in question ( see judgment in Case 78/70 ( 6 )); with regard to the exercise of patent rights attention has been focused on the substance of the right ( see judgment in Case 187/80 ( 7 )) and whether it results in restrictions on trade .

26 . In the legal systems of the Member States copyright is typically a right of exploitation in the form of the right of reproduction on the one hand and the right of public performance on the other ( applying equally to situations where it takes place by way of a sound recording ). The peculiarity of French law lies in the fact that an assignment of the right of reproduction may be restricted to a specific use ( private use ); if public use is made of the reproduction, the supplementary mechanical reproduction fee becomes payable . That was apparently considered appropriate for reasons of a proper division of income from the use of the work and in the interests of proper taxation of the beneficiaries ( these reasons may be found convincing even if the choice of a name for the fee does not seem an entirely happy one ).

27 . It might therefore be said that that aspect of French law ( the assignment of the right of reproduction for the purposes of a specific use ) forms part of the specific subject-matter of copyright and that its exercise, involving the charging of a special fee for the public use of sound recordings, is covered by Article 36 . In any event, however, it is important that in circumstances such as those of the main proceedings it may be said with regard to sound recordings imported from other Member States that the right of reproduction has been exhausted but not the right of performance which, as in the case of films ( see the judgment in Case 62/79 ( 8 )), comes into play each time the work is performed . When, therefore, the composer or his agent demands a performance fee on the public use of sound recordings in a Member State other than that of manufacture, that clearly forms part of the exercise of the substance of copyright and must therefore be tolerated under Article 36 even if it has effects restrictive of trade .

28 . ( b ) Furthermore, reference was quite properly made to provisions of international treaties to which all Member States are signatories ( that is to say, the Berne Copyright Convention of 9 September 1886, in the revised version of 24 July 1971, and the Unesco Convention of 16 September 1952 ) and to Article 234 of the EEC Treaty under which the rights and obligations arising from agreements concluded before the entry into force of the Treaty between one or more Member States on the one hand and one or more third countries on the other are not affected by the provisions of the Treaty . Since those Conventions ( the Berne Convention, incidentally, expressly states that the right of reproduction and that of public performance are protected rights ) incorporate the principle that in each contracting State works by nationals of other contracting States are to be protected in accordance with the provisions of national law ( that is to say, foreign works must be protected in the same manner as works by nationals of the State in question ), in France the French system, in all its details ( including those which on a strict view of copyright might not seem entirely convincing ) must be applied to works from other Member States . Since under French law a supplementary mechanical reproduction fee is payable on the public playing of sound recordings in France, under the Conventions referred to above that fee cannot be reserved for French works; it must also be applied to sound recordings from other Member States where such a fee is not charged, and any interference with trade which may result cannot be regarded as unlawful under Community law .

4 . 29 . It does not appear necessary to deal specifically with the other factors referred to in the first question, such as the fact that Sacem enjoys a de facto monopoly for the protection of its repertoire and is connected by reciprocal representation contracts with foreign copyright-management societies; the answer to the first question must therefore be that Article 30 of the EEC Treaty ( in conjunction, if necessary, with Article 36 of the Treaty and with international conventions ) does not prevent the French copyright-management society from charging users a royalty referred to as a supplementary mechanical reproduction fee on the public performance of works from the repertoires of foreign companies by means of sound recordings in free circulation on the territory of other Member States even where such a fee is not provided for in the Member States in which those sound recordings originate .

II - Question 2

30 . The second question is worded in the same way as the first . It seeks, however, an interpretation of Article 86 of the EEC Treaty . That is to say, it must be examined whether that provision prevents Sacem from charging the supplementary mechanical reproduction fee on the public playing of sound recordings from other Member States .

31 . In that regard we have been told that the Commission, pursuant to a complaint, is currently investigating the relations between Sacem and foreign copyright-management societies and, with regard to the amount of the fees charged by Sacem, Article 86 of the EEC Treaty . It must be pointed out, however, that these proceedings do not concern the amount of the fees charged by Sacem ( with regard to which counsel for Mr Basset made detailed submissions, including comparisons with the fees payable in other countries ). The national court has expressly held on this point that it may not be objected that the amount of the fee is unreasonable . The question for us, instead, is whether there is anything in Article 86 to suggest that the charging of the supplementary mechanical reproduction fee is unlawful in itself .

32 . With regard to the remarks made in the course of the proceedings I must admit that I find it difficult to follow the logic of the argument relating to Article 86 . Nor did the remarks made by counsel for Mr Basset shed much light on the matter .

33 . On the basis of what little argument was presented in that regard, the conclusion can only be that Article 86 of the EEC Treaty provides no foundation for the assertion that the charging of the supplementary mechanical reproduction fee is unlawful .

34 . As Sacem quite correctly submitted, the following types of abuse referred to in Article 86 do not come into consideration in this case :

( b ) the restriction of production, markets or technical development;

( c ) the application of dissimilar conditions to equivalent transactions with other trading parties ( the national court dealt with this point itself, in so far as comparison with the fees demanded of other users is concerned );

( d ) the imposition on other parties of supplementary obligations which have no connection with the subject of the contract .

35 . The only possible alternative, therefore, is the type of abuse referred to in subparagraph ( a ) - the imposition of unfair prices or trading conditions . The argument was put forward in that regard that in charging the supplementary mechanical reproduction fee Sacem had gone beyond the power delegated to it by foreign copyright-management societies .

36 . It is immediately clear, however, that that is not in fact the situation in this case . As Sacem emphasized, those contracts expressly provide for the treatment of foreign nationals in the same manner as French nationals . Indeed, as we have already seen that is also required by the relevant international conventions .

37 . Nor are the criticisms made in the report of the commission de la concurrence, referred to above, regarding the charging methods of SDRM of any assistance since only the manner in which the fee is charged is criticized, not the fee itself .

38 . The only conclusion can therefore be that the charging in France of the supplementary mechanical reproduction fee, that is to say, the exercise of a right provided for by statute, cannot be regarded as an abuse for the purposes of Article 86, even where the fee is charged on the use of imported sound recordings .

39 . If it is borne in mind, moreover, that in the light of what has already been stated there is no real question of any effects on trade and that the exercise of the right in question has nothing to do with Sacem' s dominant position ( any author or composer is entitled by statute to exercise that right, but does not for that reason alone occupy a dominant position - see judgment in Case 78/70 ), it is clear that in circumstances such as those of the main proceedings Article 86 of the EEC Treaty is not relevant .

C - Conclusion

I can only propose, therefore, that the Court reply to the questions referred by the cour d' appel, Versailles, in the following manner :

40 . Neither Article 30 nor Article 86 of the EEC Treaty prevent a national copyright-management society, which enjoys a de facto monopoly for the protection of its repertoire and is connected by reciprocal representation contracts with foreign copyright-management societies established inter alia in Member States of the Community, from charging users a royalty called a supplementary mechanical reproduction fee on the public performance of works from the repertoires of those foreign companies by means of sound recordings in free circulation on the territory of those Member States which is not provided for by the law of the Member States from which the sound recordings are imported .

(*) Translated from the German .

( 1 ) Judgment of the Court of 10 January 1985 in Case 229/83 Leclerc v Au blé vert (( 1985 )) ECR 17 .

( 2 ) Judgment of 19 February 1981 in Case 130/80 Kelderman (( 1981 )) ECR 527 .

( 3 ) Judgment of 6 November 1979 in Joined Cases 16 to 20/79 Danis (( 1979 )) ECR 3327 .

( 4 ) Judgment of 29 January 1985 in Case 231/83 Cullet v Centre Leclerc (( 1985 )) ECR 305 .

( 5 ) Judgment of 20 January 1981 in Joined Cases 55 and 57/80 Musikvertrieb Membran v GEMA (( 1981 )) ECR 147 .

( 6 ) Judgment of 8 June 1971 in Case 78/70 Deutsche Grammophon v Metro-SB-Grossmaerkte (( 1971 )) ECR 487 .

( 7 ) Judgment of 14 July 1981 in Case 187/80 Merck v Stephar and Exler (( 1981 )) ECR 2063 .

( 8 ) Judgment of 18 March 1980 in Case 62/79 Coditel v Ciné Vog (( 1980 )) ECR 881 .