Metronome Musik GmbH v Music Point Hokamp GmbH.
Date: 1998-04-28
14 That principle is expressed in the settled case-law of the Court of Justice according to which, whilst Article 36 of the EC Treaty allows derogations from the fundamental principle of the free movement of goods by reason of rights recognised by national legislation in relation to the protection of industrial and commercial property, such derogations are allowed only to the extent to which they are justified by the fact that they safeguard the rights which constitute the specific subject-matter of that property. However, the exclusive right guaranteed by the legislation of a Member State on industrial and commercial property is exhausted when a product has been lawfully distributed on the market in another Member State by the actual proprietor of the right or with his consent (see in particular Joined Cases 55/80 and 57/80 Musik-Vertrieb Membran and K-tel International v GEMA [1981] ECR 147, paragraphs 10 and 15, and Case 58/80 Dansk Supermarked v Imerco [1981] ECR 181, paragraph 11).
15 However, as the Court pointed out in Case 158/86 Warner Brothers and Metronome Video v Christiansen [1988] ECR 2605, literary and artistic works may be the subject of commercial exploitation by means other than the sale of the recordings made of them. That applies, for example, to the rental of video-cassettes, which reaches a different public from the market for their sale and constitutes an important potential source of revenue for makers of films.
16 In that connection, the Court observed that, by authorising the collection of royalties only on sales to private individuals and to persons hiring out video-cassettes, it is impossible to guarantee to makers of films a remuneration which reflects the number of occasions on which the video-cassettes are actually hired out and which secures for them a satisfactory share of the rental market. Laws which provide specific protection of the right to hire out video-cassettes are therefore clearly justified on grounds of the protection of industrial and commercial property pursuant to Article 36 of the Treaty (Warner Brothers and Metronome Video, cited above, paragraphs 15 and 16).
17 In the same judgment, the Court also rejected the argument that a maker of a film who has offered the video-cassette of that film for sale in a Member State whose legislation confers on him no exclusive right of hiring it out must accept the consequences of his choice and the exhaustion of his right to restrain the hiring-out of that video-cassette in any other Member State. Where national legislation confers on authors a specific right to hire out video-cassettes, that right would be rendered worthless if its owner were not in a position to authorise the operations for doing so (paragraphs 17 and 18).
18 As the Advocate General has rightly indicated in point 14 of his Opinion, the release into circulation of a sound recording cannot therefore, by definition, render lawful other forms of exploitation of the protected work, such as rental, which are of a different nature from sale or any other lawful form of distribution. Just like the right to present a work by means of public performance (see, in that connection, Case 395/87 Ministère Public v Tournier [1989] ECR 2521, paragraphs 12 and 13), the rental right remains one of the prerogatives of the author and producer notwithstanding sale of the physical recording.
19 Thus, the distinction drawn in the Directive between the effects of the specific rental and lending right, referred to in Article 1, and those of the distribution right, governed by Article 9 and defined as an exclusive right to make one of the objects in question available to the public, principally by way of sale, is justified.  The former is not exhausted by the sale or any other act of distribution of the object, whereas the latter may be exhausted, but only and specifically upon the first sale in the Community by the rightholder or with his consent.
21 Furthermore, according to settled case-law, the freedom to pursue a trade or profession, and likewise the right to property, form part of the general principles of Community law. However, those principles are not absolute but must be viewed in relation to their social function. Consequently, the exercise of the right to property and the freedom to pursue a trade or profession may be restricted, provided that any restrictions in fact correspond to objectives of general interest pursued by the European Community and do not constitute in relation to the aim pursued a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed (see, in particular, Case C-44/94 R v Minister of Agriculture, Fisheries and Food, ex parte Fishermen's Organisations and Others, [1995] ECR I-3115, paragraph 55).
22 The object of the Directive is to establish harmonised legal protection in the Community for the rental and lending right and certain rights related to copyright in the field of intellectual property. According to the first three recitals in its preamble, such harmonisation is intended to eliminate differences between national laws which are liable to create barriers to trade, distort competition and impede the achievement and proper functioning of the internal market. As is stated, more specifically, in the fourth, fifth and seventh recitals in the preamble to the Directive, the rental right, which, as a result of the increasing threat of piracy, is of increasing importance to the economic and cultural development of the Community must in particular guarantee that authors and performers can receive appropriate income and amortise the especially high and risky investments required particularly for the production of phonograms and films.
23 Those objectives in fact conform with the objectives of general interest pursued by the Community. It should be borne in mind, in particular, that the protection of literary and artistic property, which is a category of industrial and commercial property within the meaning of Article 36 of the Treaty, constitutes a ground of general interest which may justify restrictions on the free movement of goods (see Warner Brothers and Metronome Video, cited above, paragraph 11). It should also be noted that the cultural development of the Community forms part of the objectives laid down by Article 128 of the EC Treaty, as amended by the Treaty on European Union, which is intended in particular to encourage artistic and literary creation.
24 More particularly, the inclusion, challenged by the defendant in the main proceedings, of phonogram producers among the beneficiaries of the exclusive rental right appears justified by the protection of the extremely high and risky investments which are required for the production of phonograms and are essential if authors are to go on creating new works. As the Advocate General has explained in point 26 of his Opinion, the grant of an exclusive right to producers certainly constitutes the most effective form of protection, having regard in particular to the development of new technologies and the increasing threat of piracy, which is favoured by the extreme ease with which recordings can be copied. In the absence of such a right, it is likely that the remuneration of those who invest in the creation of those products would cease to be properly guaranteed, with inevitable repercussions for the creation of new works.