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On the right of a court to decide on the amount of royalties to be awarded subsequent to the claims of collective administration associations of copyright and related rights

The ruling of the Constitutional Court of the Republic of Lithuania of 1 December 2017

ON THE RIGHT OF A COURT TO DECIDE ON THE AMOUNT OF ROYALTIES TO BE AWARDED SUBSEQUENT TO THE CLAIMS OF COLLECTIVE ADMINISTRATION ASSOCIATIONS OF COPYRIGHT AND RELATED RIGHTS

Summary

By its ruling, the Constitutional Court, having considered the case subsequent to the petition of the Lithuanian Supreme Court, declared constitutional Paragraph 3 of Article 86 (wording of 12 October 2006) of the Law on Copyright and Related Rights (Autorių teisių ir gretutinių teisių įstatymas (ATGTĮ), hereinafter referred to as the ATGTĮ), according to which a court, where it established subsequent to a claim filed by a collective administration association that the works or subject matter of related rights had been used without a licence of the collective administration association, would take a decision to recover from the user twice the amount of the royalties that would have been payable under the granted licence, i.e. if they had been used lawfully.

In the opinion of the Supreme Court of Lithuania, the petitioner, the impugned provision  was expressed peremptorily, i.e. so that a court, when deciding subsequent to the claim of a collective administration association on awarding royalties for the unlawful use of a work or subject matter of related rights, could not follow, among other things, the principles of justice, reasonableness, and proportionality, nor was it allowed, by taking into account the relevant circumstances of the case, to adopt a decision different from the one provided for in the impugned provision. According to the petitioner, such a legal regulation restricted the possibilities for the court to administer justice and violated Paragraph 1 of Article 109 of the Constitution, as well as the principle of the equality of the rights of persons, which is consolidated in Article 29 of the Constitution.

The Constitutional Court noted that the constitutional grounds for the protection and defence of the interests of authors are enshrined in Paragraph 3 of Article 42 of the Constitution, under which the law protects and defends the spiritual and material interests of an author that are related to scientific, technical, cultural, and artistic work. The defence of the rights and interests of authors against violations is a public interest. The Constitution gives rise to the duty of the legislature to establish such a legal regulation that would ensure the effective protection of copyright and related rights. In implementing this duty, the legislature may provide for various methods of protecting copyright and related rights, whose application would, among other things, compensate the owners of copyright and related rights for losses incurred by them as a result of unlawful acts committed by other persons, as well as would create the preconditions for preventing violations of these rights.

In order to secure the aforementioned public interest and taking into account the specificity of the protection of intellectual property, copyright, and related rights, among other things, taking into consideration the fact that it might be difficult to identify some violations of copyright and related rights or the losses of the owners of copyright and related rights as a result of the said violations, the legislature may also establish, under Paragraph 3 of Article 42 of the Constitution, such a legal regulation whereby it would be possible to entrust the protection of copyright and related rights to special associated entities established for this purpose by the owners of copyright and related rights and to create the preconditions for carrying out effectively the functions entrusted to the said entities.

In the ruling, it is also noted that the principle of justice consolidated in the Constitution, as well as the provision of Paragraph 1 of Article 109 of the Constitution that justice is administered by courts, means that it is not the adoption of a decision as such in a court, but rather the adoption of a just decision by a court that constitutes a constitutional value. The legislature is not allowed to establish any such legal regulation that would not permit a court, after it takes account of all important circumstances of a case and follows law, without violating the imperatives of justice and reasonableness, which arise from the Constitution, to adopt a just decision in a case and, thus, to administer justice. Otherwise, the powers of a court to administer justice, which stem from the Constitution, would be limited or even denied.

While deciding whether Paragraph 3 of Article 86 the ATGTĮ was in conflict with the Constitution, it was noted in the ruling that this provision may not be interpreted only literally, by applying exclusively the linguistic method of interpretation. Under the provisions of the Civil Code (for instance, Paragraph 4 of Article 1.5, under which a court, when interpreting and applying laws, must follow the principles of justice, reasonableness, and good faith), when deciding subsequent to the claims filed by collective administration associations on the royalties for the unlawful use of a work or subject matter of related rights and while interpreting and applying the impugned provision of the ATGTĮ, a court was also obliged to follow the principles of justice, reasonableness, good faith, and proportionality.

The Constitutional Court held that, applying the logical and systematic methods of interpretation of law and in view of the intentions of the legislature and the relevant legal regulation (which is implemented by means of the provisions of the ATGTĮ, including the provisions impugned in this case) consolidated in the legal acts of the European Union, Paragraph 3 of Article 86 of the ATGTĮ should be interpreted as meaning that a court, when deciding subsequent to the claims filed by collective administration associations on the recovery of royalties for the unlawful use of a work or subject matter of related rights, as a rule, had been obliged to take the decision to recover from the user twice the amount of the royalties that would have been payable under the granted licence to use the work or subject matter of related items. However, having assessed the circumstances relevant to the case and based on, among other things, the principles of justice, reasonableness, good faith, and proportionality, the court had also been able to make the decision to recover a different amount of royalties for the unlawful use of the work or subject matter of related rights.

Only if the impugned provision is interpreted in a way indicated above, it is to be assessed as not having violated the requirement (arising from Paragraph 1 of Article 109 of the Constitution and the constitutional principles of justice and a state under the rule of law) that prohibits the establishment of a legal regulation precluding a court from adopting a just decision in a case and, thus, from administering justice, after the court takes account of all the important circumstances of the case, follows law, and adheres to the imperatives of justice and reasonableness stemming from the Constitution.

The petitioner also doubted the compliance of the impugned provision with Paragraph 1 of Article 29 of the Constitution as, in its opinion, the legal situation of collective administration associations had been more favourable, with regard to infringers, compared to the owners of copyright and related rights who defended their rights in a court independently: when the owners of copyright and related rights themselves would apply to a court, the possibility of being awarded twice the amount of the royalties that would have been paid if the infringer had lawfully used the works or subject matter of related rights had been linked to the form of guilt (intent and gross negligence), which must have been proven by the injured person; meanwhile, when a collective administration association would file a claim for the recovery of royalties for the unlawful use of works, the court had been under the obligation, in any case, to take a decision to recover from the user twice the amount of the royalties that would have been paid under the granted licence.

The Constitutional Court noted that Paragraph 3 of Article 86 of the ATGTĮ had established a different amount of royalties for the unlawful use of the work or subject matter of related rights subsequent to the claims filed by a specific entity, collective administration association, which was established voluntarily for administering copyright and related rights as the property rights of authors and defending these rights without their separate authorisation. Such a legal regulation had been established, among other things, in order to create the preconditions for ensuring the prevention of violations of copyright and related rights, as well as to cover the expenses incurred by collective administration associations in relation to the detection of violations.

The constitutional principle of the equality of the rights of persons, which is consolidated in Paragraph 1 of Article 29 of the Constitution, does not in itself deny the opportunity to establish, by means of a law, an unequal and differentiated legal regulation with respect to certain persons who belong to different categories if there are differences between the said persons of such a character that can objectively justify the differentiated regulation.

In the ruling, it was held that collective administration associations and the owners of copyright and related rights that defend their rights in a court independently should not be considered to be persons who are in the same (similar) situation or belong to the group of subjects characterised by the same (similar) features. They differ fundamentally, among other things, in that collective administration associations, as specific entities, bring together on a voluntary basis individual authors, performers, other entities of copyright and related rights or their associations and represent their interests by collectively administering and protecting the ownership rights entrusted to them, among other things, in cases where the individual administration or defence of copyright and related rights is not effective; while implementing the functions entrusted to them, collective administration associations incur certain expenses related to the collective administration of rights and the collection and distribution of royalties, as well as to the detection of violations of copyright and related rights; meanwhile, the said expenses are not incurred by individual authors or performers. Thus, by means of the impugned provision, the legislature implemented its duty stemming from the Constitution to ensure the effective protection of copyright and interests and established the legal regulation under which the protection of copyright and related rights was entrusted to the special associated entities established for this purpose and the preconditions were created for them to carry out effectively their functions. Therefore, such a legal regulation had not violated the principle of the equality of the rights of persons, consolidated in Paragraph 1 of Article 29 of the Constitution.