Not quite, but the UK-based Football Association Premier League (FAPL) will not be celebrating the ruling of the European Court of Justice (ECJ) on the subject from yesterday. Football Association Premier League Ltd et al. v. QC Leisure et al. bears the marks of a very significant milestone in the area of European copyright and broadcasting law. The decision tackles a number of key issues having a direct effect on the way sports associations generate revenues by selling broadcasting rights. Below is a summary of the main points concluded by a short observation.

I. The Conditional Access Directive

To begin with, the Court addressed the meaning of “illicit device” – a term appearing in the so-called Conditional Access directive. This directive is a predecessor of copyright anti-circumvention laws in Europe, that is, it contains restrictions on certain TMPs circumvention related activities, but without the copyright element in the data/service secured by those TPMs.

Article 2(e) to the directive defines illicit devices as “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.” Article 4 thereof outlaws illicit devices and related activities such as distribution and importation.

At issue here are so-called “foreign decoding devices.” Such devices can descramble scrambled satellite signals that transmit live soccer games and are purchased in one Member State (here, Greece) and being put into use in another Member State (here, the UK) for the purpose of receiving and displaying the foreign broadcasts publicly. Such practice saves for UK pubs and restaurants owners the difference in price between a UK decoder and a decoder they can buy in Greece.

Is a foreign decoding device an “illicit device” (thus unlawful under the Conditional Access directive) where buyers provide false name and address or where a breach of private-use-only restrictions takes place? The ECJ said NO. The devices were manufactured under the authorization of the service provider (the FAPL), they do not facilitate free access (they cost money) and they do not enable or facilitate circumvention of TPMs designed to protect a remuneration scheme [paras. 63-67].

First Important Holding: Foreign decoding devices are not covered by the Conditional Access directive even when the buyer provides false personal date or breaches contractual private-use-only obligations.

II. EU Competition Law

Member States hence are not obligated to protect territorial exclusivity licensing schemes of broadcasts under the Conditional Access directive by banning foreign decoders. Going beyond this, the Court held that States that do ban foreign decoders in fact violate European competition law!

Analyzed under the purview of the EU Treaty obligation to protect the freedom to provide services across the internal market, the ECJ virtually strikes down national legislation that enforces territorial licensing schemes within the EU regarding live sporting broadcasts for violating a “fundamental freedom” guaranteed by the EU Treaty, to the extent they are not supported by overriding reasons in the public interest [para. 75 ff.]

Can the desire to enforce IP rights provide such overriding reasons? The Court begins by clarifying that sporting events per se are not copyrighted subject matter under European copyright law. That said, Member States are free to create sui generis protection to such events. Besides, some elements of the primary FAPL broadcasts, such as the Premier League anthem or pre-recorded films showing highlights of recent Premier League matches, likely qualify for protection under standard copyright rules.

In paragraph 108, the Court states:

“[T]he specific subject-matter of the intellectual property does not guarantee the right holders concerned the opportunity to demand the highest possible remuneration. Consistently with its specific subject-matter, they are ensured … only appropriate remuneration for each use of the protected subject-matter.”

In other words, holding IP rights in the broadcasts is no blanket permission to enforce any licensing scheme, however restrictive, for the purpose of maximizing revenues and thereby impeding the freedom to provide services throughout the EU and eliminating competition among local broadcasters.

The Court arrives at the conclusion that “[t]he payment of [] a premium [by local broadcasters for the right to exclusively offer the broadcasts in the local market] goes beyond what is necessary to ensure appropriate remuneration for [IP] right holders” and that “[t]he restriction which consists in the prohibition on using foreign decoding devices cannot be justified in light of the objective of protecting intellectual property rights” (paras. 116-117). This language is striking in its lucidity and the manner in which it appears to subordinate IP principles of exclusivity to free competition principles of openness.

But the Court goes even further. Until that point, it was dealing with public lawmaking banning foreign decoding devices as violating EU competition law. In paragraphs 134-146 of its decision, the Court explains why also privately negotiated exclusivity provisions might violate EU competition law (namely, Art. 101(1) TFEU), to the extent such contractual clauses have an objective or effect of prevention, restriction or distortion of competition. In the Court’s words, “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) TFEU” (para. 139).

Second Important Holding: Both (1) legislation that bans foreign decoders and (2) clauses in an exclusive license agreement that serve to enforce exclusivity by obligating the broadcaster not to supply access-enabling decoding devices for use outside the territory covered by that license agreement, violate EU competition law.

III. EU Copyright Law

The focus now shifts to some questions more typical to digital copyright and the principal legislation in the area, the Information Society directive.

Assuming a broadcast contains copyrighted elements, does the temporary reproduction of data segments on the memory of decoding equipment triggers the reproduction right? The Court answers this question in the positive while applying the following test:

[T]he unit composed of the fragments reproduced simultaneously – and therefore existing at a given moment – should be examined in order to determine whether it contains [the expression of intellectual creation of the author] elements. If it does, it must be classified as partial reproduction for the purposes of Article 2(a) of the Copyright Directive ... In this regard, it is not relevant whether a work is reproduced by means of linear fragments which may have an ephemeral existence because they are immediately effaced in the course of a technical process [para. 157].

In other words, inasmuch as the data segment that exist on a component in a given moment qualifies in itself as a representation of copyrighted subject matter, the reproduction right is implicated. (As a side note, I am not sure it is even possible, as a technical matter, to prove or disprove a factual determination on this regard.)

However, the limited exception in Article 5(1) of the Information Society directive excuses temporary reproduction in this case, since, as the Courts finds, all of its five elements are satisfied: Reproduction here is (1) temporary, (2) transient or incidental, (3) an integral part of a technological process, (4) its sole purpose is to allow a lawful use and (5) it has no independent economic significance.

That said, displaying copyright protected broadcasts in public houses such as bars or restaurants violates the communication to the public right stated in Article 3(1) of the same directive. The Court’s reasoning is that using foreign decoding devices for such purpose transmits the works to a “new public, that is to say, to a public which was not taken into account by the authors of the protected works when they authorised their use by the communication to the original public” (para. 197).

Third Important Holding: Using foreign decoders does not violate the exclusive reproduction right granted to copyright holders under European law, but using it in public places to display the broadcasts to local audiences violates the exclusive communication to the public right.

My initial observation: The Court appears to have convincingly answered at least some of the questions on the long list presented to it by the referring courts. Yet it is hard to avoid the impression that the holding sends two conflicting signals to the market: As far as competition law is concerned, rights holders are not permitted to draft agreements that secure exclusivity to one broadcaster within a territorial unit for live broadcasting of sporting events. Competition law interests go so far as to barring state legislation that would make foreign decoding devices illegal, the devices which are designed to enforce selective access to a given broadcast within a given territorial unit.

At the same time, copyright interests of rights holders in the broadcasts allow them to price-discriminate on the basis of intended audience, also on the basis of territory in which the respective audience is located. For that reason, using the foreign decoders that competition law would embrace is held illicit under copyright law when the devices are used to enable public viewing in violation of the license to receive and display the broadcasts.

There is a loop here, since the Court’s copyright violation analysis is premised on the intention of copyright holders to expose broadcasts under a given license to a certain audience but not to another by means of exclusive broadcasting licensing, an intention it held several paragraphs earlier as anti-competitive!

As a practical matter, I think the competition aspect will trump in the end. It is bad enough for the FAPL not to be able to offer and enforce one single exclusive license via-a-vis a single broadcaster per Member State and effectuate its dictations through the chain of enforceable licensing agreements downstream. The clear statements of the ECJ, to a large extent, break its monopoly within the domestic market and across the EU. In such a situation, the FAPL could try to enforce private-view-only licenses against end users, but this would have to be done on an individual basis, which means, it is going to by costly and far less effective as compared to a working system of regional decoders.

If this assessment is correct, the FAPL, having initiated this litigation and carried it through all the way up to the ECJ, has scored what people in soccer nations call own goal.