Spas cannot freely transmit music to their guests without paying royalties to the copyright holders of such musical works, the Court of Justice of the European Union recently affirmed.

The EU copyright directive obliges member states to ensure that copyright holders enjoy exclusive rights to authorise or otherwise the reproduction, distribution and the communication to the public of protected works. A number of limited exemptions to these exclusive rights are catered for in the directive itself.

OSA, a copyright collecting society, holds the exclusive right in the Czech Republic to collect fees on behalf of authors for the use of their musical works.

A Czech spa company installed radio and television sets in the bedrooms of its establishment in order to make music available to its guests. It did not enter into a licence agreement with OSA and refused to pay copyright fees to it on the basis that Czech law permits health establishments to freely transmit protected works. OSA filed an action before the Czech courts claiming that the spa company should be ordered to pay the relevant copyright fees and alleging that Czech law was in breach of the EU Copyright Directive. The Czech court seized of the case filed a preliminary reference to the Court of Justice of the European Union requesting guidance as to whether the exemption found in Czech law was compatible with the EU copyright directive.

Transmitting protected works by means of television and radio sets located in the bedrooms of guests [is] communication to the public of protected works

The CJEU pointed out that what the spa company was doing, that is, transmitting protected works by means of television and radio sets located in the bedrooms of its guests, was to be considered as communication to the public of protected works. EU law clearly provides that such an act of communication must be authorised by the authors of such works who are in turn entitled to adequate compensation. The CJEU confirmed that the EU copyright directive does not make provision for any exemption in this regard in relation to spas. Therefore, the exemption provided for in the Czech law was not compatible with EU law and hence illegal.

Interesting to note that in its judgment, and upon the request of the Czech court, the CJEU also confirmed that though collecting societies such as OSA often enjoy territorial monopoly which could be considered as a restriction on the freedom to provide services, such a restriction was nonetheless justified. The Court acknowledged that such a monopoly prevented users of protected works from choosing the services of a collecting society established in another member state. However, the Court observed that such a system was indeed appropriate and necessary for ensuring the effective management of intellectual property rights. It noted that currently, EU law does not cater for any other method allowing the same level of copyright protection. However, the CJEU drew attention to the fact that the imposition by a national copyright collecting society of fees which are appreciably higher than those charged in other member states or the imposition of excessive prices could be considered to be an abuse of a dominant position and hence illegal in terms of competition law.

The effective protection of intellectual property rights is indispensable in order to stimulate innovation and creativity within society. Adequate compensation to copyright holders is a way of rewarding such holders for the hard work involved in creating something innovative.

Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.

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