The Court of Justice of the EU on twice the appropriate remuneration under the Act on Copyright and Related Rights

The judgement issued on 25 January 2017 (Case C-367/15, the OTK Association v. Polish Filmmakers Association) considered as compatible with EU law the provision of the act of 4 February 1994, on Copyright and Related Rights which allows the holder of copyrights to request from the infringer of these rights twice the sum equivalent to the appropriate remuneration, which would be demanded in respect of the award by an authorized approval for use of the work (article 79 paragraph 1 point 3 b of the Act on Copyright and Related Rights).

The case specifically concerned the compatibility of the provision of article 13 of the 2004/48/EC Directive of the European Parliament and of the Council of 29 April 2004, on the enforcement of intellectual property rights (Journal of Laws of 2004, L 157, p. 45, the “2004/48 Directive”). The background of the case in the Court was a dispute between the Polish Filmmakers Association (“PFA”) – an organization representing the collective management of rights holders to videos, and the Oławska Telewizja Kablowa Association (“OTK”). After the termination in December 1998 of the license agreement entered into by these entities, the OTK continued to benefit from the protected audiovisual works, but also directed to the Copyright Commission a proposal to agree on the remuneration payable for the use of copyright, managed by the PFA. Following the Commission’s decision fixing the remuneration, the OTK made a calculation of the amount due and paid it to the PFA in the amount of about PLN 34 thousand. However, the amount was recognized by the PFA as being too low and on 12 January 2009, filed a lawsuit against the OTK, in which the PFA demanded the award of approx. PLN 390 thousand on the basis of the abovementioned article 79 paragraph 1 point 3 letter b) of the Act on Copyright and Related Rights, and also to prohibit the OTK the retransmission of the protected audiovisual works until the conclusion of a new license agreement.

This case repeatedly passed through the Supreme Court, but when it went to the Supreme Court for the third time, the court decided to ask the ECJ a question whether the possibility of the request by the holder of the copyrights double, or in the case of culpable violation – triple the appropriate remuneration, as an alternative to compensation on general principles, is consistent with the provisions of the abovementioned Directive. The Supreme Court has raised doubts in particular as to whether the article 13 of the 2004/48 Directive allows  the proprietor, whose copyrights have been violated, to seek compensation for damages caused to him without having to demonstrate injury and causal link between the violation of the rights and the damage done, and require payment a predetermined lump sum, since article 13 of the 2004/48 Directive provides that the court decides about compensation, which takes into account the circumstances mentioned in article 13 paragraph 1 point a) of the 2004/48 Directive, and only as an alternative in some cases it may establish a lump sum, taking into account the elements mentioned in article 13 paragraph 1 point b) of the abovementioned Directive. Moreover, according to the Supreme Court the said provision of the Polish act provides for a specific sanction for the offender, while the article 26 of the preamble to the 2004/48 Directive indicates that the aim of the Directive is not to provide for punitive damages.

The ECJ in the above judgement made the following statements:

• The 2004/48 Directive introduces minimum standards of respect for intellectual property rights and does not prohibit Member States to establish measures for stronger protection. In view of the fact that this directive does not require the application by the Member States of the so-called punitive damages, it can not be interpreted as prohibiting the introduction of such a measure.
• Article 13 of the 2004/48 Directive allows Member States the right to adopt measures providing for a lump sum as an alternative to the “regular compensation”, and the characteristic feature of any lump-sum compensation is that it is not exactly proportional to the actual damage. That provision of the Directive allows Member States to introduce such regulations as in article 79 paragraph 1 point 3 letter b), i.e. the measures allowing the holder whose intellectual property has been infringed upon to request the infringer to pay a sum of money in the amount equivalent to twice the appropriate compensation that would be payable in respect of granting permission to use the work without demonstrating the real damage by the holder. The ECJ pointed out the fact that the justification for the claim may be “multiples” of such remuneration, rather than a simple sum of royalties, is that such a sum does not constitute a compensation for all the damage actually suffered, in particular, it would not cover expenses related to the examination and identification of possible infringement acts. However, if in some cases it would appear that the compensation calculated on the basis of twice the hypothetical license fees would go significantly beyond the actual damage suffered, the court may treat such request of an authorized as an abuse of rights, non-binding for the court.

Interestingly, the Court did not share, to a large extent, the views of the Advocate General E. Sharpston expressed in the opinion on that matter, which opted for it to be considered  article 13 paragraph 1 of the 2004/48 Directive must be interpreted as meaning a lump sum can not be automatically entitled to in the event of infringement, and only in exceptional situations, which should be demonstrated by the holder (e.g. it would be difficult to determine the sum of the actual prejudice suffered). Referring to the Polish provision of twice the appropriate remuneration on the other hand, the Advocate General pointed out that such a request is permitted under EU law insofar as we accept the fact that the holder should demonstrate the requested amount is proportional to the damage suffered.

For comparison, we recall  the June 23th, 2015, a judgement by the Polish Constitutional Court (case no. SK 32/14) was issued, which declared unconstitutional a provision (a part of the article 79 paragraph 1 point 3 letter b) which provides for the possibility to request by the holder the sum of three times the appropriate remuneration, as a result of which such a claim is no longer possible today. The Constitutional Court did not question the possibility of imposing liquidated damages as such, but stated that the opportunity to request three times the appropriate remuneration that would be due for the holder for agreeing to the use of works, leads to the total loss of ratio between the amount of the damage suffered and the amount of such compensation.

The Constitutional Court did not comment, however, on requesting twice the remuneration, because the proceedings before the Court was limited to testing the constitutionality of the obligation to pay three times the appropriate remuneration for the holder of the copyrights.

Of course, the ECJ judgement does not prejudge in any way the constitutionality of the claim for payment of twice the appropriate remuneration. It can not be ruled out that the Constitutional Court, when examining the compliance with the Constitution of the Republic of Poland the provision for such a claim, would make a similar conclusion as in the case of the obligation to pay three times the appropriate remuneration, and also the “double” would be eliminated from the Polish legal system. In this case, the holder of copyrights would have the possibility to claim compensation on general terms, requiring, among others, to demonstrate the amount of damage or possibly to request the return of benefits.