Territorial exclusivity agreements on transmission of football matches appears contrary to EU law

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On February 3 2011 the European Court of Justice (ECJ) Advocate General Juliane Kokott issued a non-binding opinion that broadcasters cannot prevent consumers in the United Kingdom from using cheaper foreign satellite television equipment to watch Premier League football matches, as this is contrary to the free movement of services within the European Union (Premier League and others v QC Leisure and others and Karen Murphy v Media Protection Services Ltd, joined cases C-403/08 and C-429/08).

If followed by the ECJ, this approach could pave the way for a revolution in the sale of televised sports rights in Europe.

Background

The Football Association Premier League Ltd (FAPL) is the marketing organisation for England’s top professional football league. The FAPL grants its licensees (at present, BSkyB and ESPN) the exclusive right to broadcast and economically exploit matches within their respective broadcasting areas.

In order to safeguard this exclusivity, licensees must prevent their broadcasts from being available for viewing outside their respective broadcasting areas. Each licensee must encrypt its satellite signal and transmit it in encrypted form to subscribers within its assigned territory. Subscribers can decrypt the signal using a decoder, which requires a decoder card. The exclusivity agreement also imposes restrictions on the circulation of authorised decoder cards outside the territory of each licensee.

Facts

Ms Karen Murphy, the landlady of the Red, White and Blue pub in Portsmouth, England, found a cheap means of showing Premier League football in her pub: she took out a subscription, complete with decoder box and viewing card, with Greek satellite broadcaster NOVA. Murphy considered the monthly subscription to the United Kingdom’s exclusive broadcasters to be unaffordable.

In January 2007 Murphy was convicted of fraudulent reception of transmissions under Section 297(1) of the Copyright, Designs and Patents Act, as she had dishonestly received “a programme included in a broadcasting service provided from a place in the United Kingdom with intent to avoid payment of any charge applicable to the reception of the programme”.

Murphy appealed to the UK High Court, which requested an opinion from the ECJ.

The ECJ was also requested to issue a preliminary ruling on the action brought by the FAPL against companies importing decoder cards from Greece and certain Middle Eastern states into the United Kingdom, where they were offered to pubs at more favourable prices than those available from the licensed broadcaster.

The advocate general’s opinion addresses some significant issues relating to broadcast and copyright laws, competition law and EU fundamental freedoms.

EU Conditional Access Directive

The first question for the ECJ was whether a decoder card, lawfully manufactured and marketed in Greece, becomes an ‘illicit device’ under the EU Conditional Access Directive (98/84/EC) once imported into the United Kingdom. Article 2(e) states: “‘[I]llicit device’ shall mean any equipment or software designed or adapted to give access to a protected service in an intelligible form without the authorisation of the service provider.

In the view of the FAPL, it was sufficient for that purpose that the decoder cards were used in the United Kingdom to receive transmissions from the Greek broadcaster, and that receiving such in that place was against the will of the relevant rights holder.

However, the advocate general considered that the decoder card was designed precisely to provide access with the service provider’s authorisation – the service provider (ie, the Greek broadcaster) had placed it on the market specifically for that purpose. Moreover, a decoder card is not ‘adapted’ by virtue of importation into the United Kingdom.

Reproduction right

The High Court asked whether the digital communication of broadcasts affects the author’s right in the reproduction of the work. For technical reasons, the communication of digital programmes requires short sections of the broadcast to be stored in the decoder’s memory buffer.

The advocate general first clarified that:

  • the reproduction right applies to live transmissions;
  • acts of reproduction occur where frames of digital video and audio content are created in a decoder’s memory, as these frames are part of the intellectual creation of the author of the broadcast; and
  • the display of a broadcast on a screen constitutes reproduction.

Therefore, the temporary storage of frames of a transmission in a decoder’s memory and their display on a television screen may infringe the right to control reproduction, as such right is conceived of in broad terms under Article 2 of the EU Copyright Directive (2001/29/EC) as including direct and indirect, temporary and permanent reproduction, by any means and in any form, in whole or in part.

However, in the advocate general’s opinion the copies created in a decoder’s memory may benefit from the exception in the directive, which under Article 5(1) allows for temporary storage (which has no independent economic significance in itself) for technological reasons. In contrast, transient copies of a work created on a television screen that is linked to a decoder box have economic significance.

Right of communication to the public

The advocate general rejected the FAPL’s copyright argument that showing live transmissions of football matches in pubs infringes the exclusive right of communication to the public that attaches to protected works.

In this regard, the advocate general explained that as EU law stands, no comprehensive rights protect the communication of a broadcast to the public if no entrance fee is charged to view the broadcast.

Freedom to provide services

The advocate general considers that the resolution of the cases in the proceeding in question essentially depends on the application of the freedom to provide services under Article 56 of the Treaty on the Functioning of the European Union, the disputed issue being the use of cards to gain access to encrypted programmes in the United Kingdom.

In the advocate general’s opinion, the selling of sports distribution rights on a country-by-country basis through exclusive agreements has the effect of partitioning the internal market into separate national markets, seriously affecting the freedom to provide services.

Therefore, the advocate general’s advice to the ECJ is to interpret such fundamental freedom as excluding the enforcement of rights to satellite programmes whereby rights holders can prohibit third parties (to which they are not contractually linked) from watching and showing such programmes in EU member states other than those intended by the rights holder. The exercise of such rights would prevent the use of services from other member states (ie, access to television programmes).

The advocate general found that the impairment of the freedom to provide services was not justified by the protection of IP rights, such as the rights in the transmission of football matches. Rather, the live transmission of Premier League football matches is exploited through the charge imposed for decoder cards. In the advocate general’s opinion, the economic exploitation of the rights in question is not undermined by the use of foreign decoder cards insofar as the corresponding charges have been paid for those cards. The charges in question are lower than those imposed in the United Kingdom, but the advocate general stated that there is “no specific right to charge different prices for a work in each member state. Rather, it forms part of the logic of the internal market that price differences between different member states should be offset by trade”.

The marketing of broadcasting rights on the basis of territorial exclusivity is tantamount to profiting from the elimination of the internal market.

Moreover, the advocate general considered that the application of the principle of the freedom to provide services is in line with the EU Satellite and Cable Directive (93/83/EEC) and with European competition law.

UEFA and British Sky Broadcasting Ltd v Euroview Sport Ltd

A similar case is pending before the ECJ. The Union of European Football Associations (UEFA) issued proceedings against Euroview, an importer of decoder cards into the United Kingdom. Use of the cards allows pubs or other users in the United Kingdom to show UEFA Champions League and Europa League football matches that are broadcast from outside the United Kingdom.

The High Court has referred to the ECJ for a preliminary ruling at UEFA’s request. The ruling on FAPL’s case is likely to indicate the outcome of UEFA’s case.

Comment

Opinions from the advocate general are not binding on the ECJ, but are followed in around 70% of cases. The ECJ is expected to rule on the case in the next few months. The potential impact on rights holders and pay-television prices is huge. If the ECJ follows the advocate general’s views, the FAPL might be forced to offer pan-European rights deals in order to allow competition between broadcasters across the European Union.

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