Andres Guadamuz Sussex

Where can you sue?

The Court of Justice of the European Union (CJEU) has once more helped to answer one of the most puzzling aspects of Internet regulation, where do things happen online? In particular, they have answered where can a copyright collective management agency sue to try to recover missing royalties.

The case is Austro-Mechana Gesellschaft v Amazon EU (C‑572/14), and it involves the Austrian music collecting rights agency and the EU branch of Amazon. The issue is a preliminary judgement sought with regards to whether the case can be heard in an Austrian court. The Austrian collective management agency sued Amazon in an Austrian court trying to exercise their right to collect “fair remuneration” for music available in Austria under copyright law. The case was dismissed in first instance because the court declared that it lacked international jurisdiction, and an appeals court affirmed that decision. Austro-Mechana appealed those rulings to the Austrian Supreme Court, which stayed proceedings to refer the following question to the CJEU:

‘Does a claim for payment of “fair compensation” under Article 5(2)(b) of [Directive 2001/29] which, in accordance with Austrian law, is directed against undertakings that are first to place recording material on the domestic market on a commercial basis and for consideration constitute a claim arising from “tort, delict or quasi-delict” within the meaning of Article 5(3) of [Regulation No 44/2001]?’

The laws in question are the InfoSoc Directive (Directive 2001/29/EC) and the Brussels I Regulation (Regulation No 44/2001) respectively. The InfoSoc Directive reads:

Art 5(2) Member States may provide for exceptions or limitations to the reproduction right provided for in Article 2 in the following cases: […]
(b) in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures referred to in Article 6 to the work or subject-matter concerned;

And the Brussels I Regulation reads:

Art 5. A person domiciled in a Member State may, in another Member State, be sued: […]
3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur;

So the question boils down to whether a fair compensation claim is a claim in “tort, delict or quasi-delict”. If it is, then Austro-Mechana can sue Amazon in an Austrian court to try to recover money for fair compensation. If not, then the lower courts were justified in dismissing the suit on jurisdiction grounds.

The CJEU ruled in favour of Autro-Mechana by assessing that a claim for fair compensation does indeed fall under the definition of a claim in “tort, delict or quasi-delict”, so the collecting society can sue in an Austrian court. The court decided that the obligations that Amazon had were not a matter of contract, and therefore would fall under the tort definition. In my opinion, this was to be expected given the CJEU’s track record in the area of jurisdiction, where it seems to be a presumption that owners can generally sue in their jurisdiction because they are located where the damage takes place.

However, for me the most interesting part of the case is the discussion of why Austro-Mechana is suing in the first place, and here is where the bulk of the legal discussion takes place. Austro-Mechana is suing Amazon because it sells devices capable of recording music, this act of private copying is not performed by Amazon, but by its customers. Under the InfoSoc Directive, those who sell such devices must pay a “fair compensation” to the rightsholders, therefore allowing private copying to continue to exist as an exception to copyright. Amazon was not paying such a compensation, hence the lawsuit.

Here the Court relied heavily on the earlier decision on levies in Copydan Båndkopi v Nokia Danmark (C‑463/12), in which it was decided that national legislation has a lot of leeway in providing details to the implementation of private copying in each jurisdiction given that the InfoSoc Directive does not specify the regime for enacting compensation schemes. The Court explains:

“48. Furthermore, although it is true, as Amazon argues, that the making available of recording media does not in itself constitute an unlawful act and that as the Republic of Austria has decided to implement the private copying exception provided for in Article 5(2)(b) of Directive 2001/29, the making of copies for private use by means of such media is an act authorised by Austrian law, the fact remains that under that provision Austrian law subjects the making of those private copies to the condition that rightholders are to receive ‘fair compensation’, that is, in the present case, the remuneration provided for in Paragraph 42b(1) of the UrhG.

49      By its claim, Austro-Mechana does not criticise Amazon for making available recording media in Austria, but for failing to comply with the obligation to pay the remuneration it is required to pay under the UrhG.

50      Thus, Austro-Mechana’s claim seeks to establish the liability of the defendant, since that claim is based on an infringement by Amazon of the provisions of the UrhG imposing that obligation on it, and that that infringement is an unlawful act causing harm to Austro-Mechana.”

An interesting decision, the CJEU is not ruling on whether Austro-Mechana are correct (although there seems to be a very strong hint that it thinks that it has a case), but it clearly expects that the collective society can sue in an Austrian court. The case now goes back to the Supreme Court, which will probably have to send it back to the lower court for a decision on the fair compensation question.

On a side note, it seems like every important Internet jurisdiction decision involves Austria.

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