European Union: Premier League TV Rights Ruling - Implications For Media Rights Holders And Broadcasters

On 4 October 2011, the Grand Chamber of the Court of Justice of European Union delivered its preliminary ruling on a series of questions raised by the High Court as to whether the Premier League can lawfully guarantee absolute territorial protection to those broadcasters it has awarded licences to for the broadcasting of live matches.

Facts

In common with most other owners of media content, the Premier League seeks to maximise the commercial value of its broadcasting rights. As a general rule, it is demand that determines the territorial basis on which the broadcasting rights are sold, demand tending to be for national rights rather than for global or pan-European rights.

As the Court explains in its judgment, in order to protect the territorial exclusivity of broadcasters, each licence holder undertakes, in its licence agreement with the Premier League, to prevent the public from receiving broadcasts outside the area for which it holds its licence. These obligations require each broadcaster to ensure that all of its broadcasts capable of being received outside that territory - in particular those transmitted by satellite - are encrypted securely and cannot be received in unencrypted form. Broadcasters must also ensure that no device is knowingly authorised so as to permit anyone to view their transmissions outside the territory concerned.

The Premier League brought what it believed to be a series of test cases before the courts in the UK. A number of these were against suppliers of satellite decoder cards to pubs and bars (the decoders enabling the reception of live Premier League games transmitted by foreign licensed broadcasters). Others were against pub owners, including the now famous Ms Murphy, who had screened live Premier League games using a foreign decoding device. The cases came before the High Court, which referred a series of questions to the Court on the application of UK copyright legislation and the legality of the obligations on broadcasters to guarantee absolute territorial protection within the EU.

Enforcement of UK copyright legislation

The Premier League had relied on the provisions of the Copyright, Designs and Patents Act 1988 and on the obligations on the licensed broadcasters to whom the broadcasting rights had been sold. The Act makes it an offence for a person dishonestly to receive a programme broadcast from within the UK with the intent of avoiding payment of any charge applicable to the reception of that programme (Section 297(1)). Section 298 of the Act also provides a right of action to the rights holder against any person who makes, imports, sells or uses any unauthorised decoding devices (equivalent to the rights a copyright owner has in respect of an infringement of copyright).

The principal question the Court was asked to rule on was whether those provisions of the Act were compatible with EU internal market rules. The Court concluded simply that the Act prevents the services from being received by persons resident outside the Member State of broadcast, Section 298 of the Act conferring legal protection on the contractual restrictions in the broadcasters' licences (paragraphs 87 and 88). It therefore constituted an illegal restriction on the freedom to provide services unless it could be objectively justified. The Court considered two potentially legitimate objective justifications for such a restriction: (1) the protection of intellectual property rights in the programming; and (2) the objective of encouraging the public to attend football matches. It rejected both, but it is the rejection of the intellectual property justification that will be of most interest to media owners.

The Court first re-affirmed its previous case-law that sporting events cannot be regarded as intellectual creations capable of attracting copyright protection, in particular in the case of football matches, 'which are subject to rules of the game, leaving no room for creative freedom for the purposes of copyright' (para. 98).

The Court went on to recognise that it was nevertheless expressly envisaged in the Television Without Frontiers Directive that Member States had the power to confer IP protection on sporting events, and that this was a matter for the High Court to consider when deciding these cases. Therefore, if Premier League games were determined by the High Court to have the protection of IPR as a matter of UK law, EU law would not preclude, in principle, that protection.

However, the Court ruled that it was also necessary - as a matter of EU law - for any such restrictions not to go beyond what was necessary in order to attain the objective of protecting that IPR (even were such protection to be afforded to the matches).

Significantly, the Court held that, 'the specific subject-matter of the intellectual property does not guarantee the right holders concerned the opportunity to demand the highest possible remuneration. As a matter of EU law, rights holders 'are ensured (...) only appropriate remuneration for each use of the protected subject-matter' (para. 108).

The Court continued, 'in order to be appropriate, such remuneration must be reasonable in relation to the economic value of the service provided. In particular, it must be reasonable in relation to the actual or potential number of persons who enjoy or wish to enjoy the service' (para. 109).

It was however 'irreconcilable' with the fundamental aim of a single internal market within the EU for broadcasters to pay a premium to rights holders in order to guarantee absolute territorial exclusivity (para. 115).

Competition law treatment of the licence restrictions placed on broadcasters to guarantee absolute territorial Protection

The Court considered whether the clauses of an exclusive licence agreement concluded between a rights holder and broadcasters breached EU competition law rules where they obliged the broadcaster not to supply decoding devices giving access to that right holder's protected subject-matter outside the territory covered by the licence agreement.

The Court concluded that 'agreements which are aimed at partitioning national markets according to national borders or make the interpenetration of national markets more difficult must be regarded, in principle, as agreements whose object is to restrict competition within the meaning of Article 101(1) of the Treaty' (para. 139).

The Court emphasised that the actual granting of exclusive licences for the broadcasting of Premier League matches was not being called into question. It was the imposition of additional obligations that restricted broadcasters from supplying foreign decoders enabling access in another licensee's territory (all within the EU) that violated EU competition rules. The granting of absolute territorial exclusivity to broadcasters prevented any cross-border competition. It was clearly anti-competitive and could not satisfy the Article 101(3) conditions for an exemption.

Comment

It is perhaps not surprising that the Court ruled that commercial arrangements aimed at guaranteeing absolute territorial protection for broadcasters licensed within the EU breach EU competition law rules and could not be justified by IP protection.

What is surprising, though, is the Court's statement that intellectual property rights, 'do not guarantee the rights holders the opportunity to demand the highest possible remuneration' and the concept of 'appropriate remuneration' (para. 108). This statement does not, for example, sit comfortably with the EU case-law on excessive pricing and the concept of 'economic value' of products (as discussed in the judgments of the High Court and Court of Appeal in the Attheraces case concerning the commercialisation of pre-race data). It is also unclear how rights holders can sensibly interpret the Court's statement that, 'in order to be appropriate, such remuneration must be reasonable in relation to the economic value of the service provided' and must, 'be reasonable in relation to the actual or potential number of persons who enjoy or wish to enjoy the service' (para. 109).

The Court's judgment will now be considered by the High Court, which will decide the series of individual cases before it. The obvious implication is that the current Premier League TV deals will be devalued to the extent that pubs and bars may now feel more confident in purchasing foreign decoders to screen live matches broadcast by broadcasters licensed in other EU Member States.

The Premier League and other rights holders looking to commercialise media content will have to think carefully how to structure future deals. This may mean looking at pan-EU deals. But equally it may simply mean pricing into those deals the fact that broadcasters will not be able to restrict 'passive' sales of perhaps inferior broadcasts from foreign broadcasters (given that broadcasts will presumably be targeted at customers in their individual licensed territories in terms of advertising and commentary etc.).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.