My most recent report on the Municipal Court of Appeals’ interlocutory judgment in the Deezer case is available on the website of the Journal of Intellectual Property Law and Practice. Read it here, too.

Legal context

Making available to the public is an exclusive right of musical performers under HCA Article 73(1)(e), and such right can be exercised via CMOs under Article 74(2). Collective rights management has an extended nature in Hungary, which means that national and international rightholders are equally represented by the respective organizations with respect to uses in Hungary, unless they expressly opt-out from the regime in compliance with HCA Article 87(3) and Article 18(1) of the newly enacted Act XCIII of 2016 on Collective Rights Management (CMO Act).

Facts

Deezer, one of the leading music streaming portals, launched its service in Hungary on 1 October 2012. Its free, premium and premium plus models were offered under the authorization of the composers’ CMO, Artisjus and of the record labels. At the same time, Deezer made available to the public its repertoire—30 plus million unique songs in 2014 and 40 plus million currently—without the consent of the competent CMO representing musical performers, namely Előadóművészi Jogvédő Iroda (EJI, in English: Bureau for the Protection of Performers’ Rights). EJI therefore sued Deezer seeking a judgment holding that the unauthorized streaming of fixed musical performances is unlawful under Act LXXVI of 1999 on the Hungarian Copyright Act. EJI also sought an order that would require Deezer to provide relevant data in order to calculate damages.

The claimant argued that nobody had opted-out of the system until 2016, when eight musical performers requested that they cease being represented by EJI. Consequently, the CMO argued that the provision of streaming services without the authorization of and payment to EJI was an infringement of the making available right of musical performers. EJI further contested that the payment of any royalties by Deezer directly to the producers of sound recordings under unique licensing agreements would exempt the streaming platform from the obligations (licensing and paying levies) to EJI. This is statutorily provided under HCA Article 86(2) and CMO Act Article 8.

Deezer did not deny that it did not seek permission from EJI, but it claimed that this would not be required because all performers had previously transferred their rights to the producers. Deezer further argued that the claimant’s requests to provide data and also for remedies would go astray of the realities of streaming services. In other words, Deezer submitted that providing the names of performers and titles of performances streamed by Hungarian users during the relevant period of the claims would cause an undue burden. The defendant also claimed that EJI had acted wrongfully when it did not publish the list of all represented clients and the English translation of the relevant copyright provisions on its website.

Analysis

The Municipal Court of First Instance accepted all of the claimant’s arguments in its interlocutory judgment (1.P.26.229/2013/54). It confirmed that the right of making available to the public is an exclusive right of musical performers that can be exercised via a representative CMO, unless a performer opts-out properly by complying with the rules of HCA and CMO Act. The court also confirmed that a musical streaming service should be regarded as making available content, as end-users can select the time and place of accessing such content on an individual basis. The lack of publication of the names of musical performers represented by EJI is not a misuse of rights, as international performers are lawfully represented by EJI under the concept of extended collective rights management and EJI has published the list of performers who directly authorized EJI to represent them. Any submissions to the contrary must be evidenced by the defendant. Any payment to sound record labels cannot exempt a streaming platform from seeking a licence and paying the necessary fees to EJI. Payment to record labels alone might be relevant only if relevant performers opted-out of EJI’s regime. Consequently, the Municipal Court of First Instance obliged the defendant to disclose the necessary data requested by EJI in 15 days. The relevant information includes: the number of subscribed users; the net income of Deezer each relevant month; the number of musical performances that were made available to the public by Deezer each month; and finally, the name of the main artist, the title, the record label and the year of release of each performance. The court also ordered the defendant to publish the decision at its own cost.

The Municipal Court of Appeals confirmed the above ruling almost in its entirety by its interlocutory judgment (8.Pf.21.212/2017/6). It only changed the trial court’s ruling on the deadline of data disclosure to 45 days.

Practical significance

The Sixth Circuit in the USA argued in the famous Bridgeport Music case that bright line rules are needed with respect to musical sampling, and the panel concluded ‘[g]et a licence or do not sample’ (Bridgeport Music, Inc v Dimension Films, 410 F 3d 792 (6th Cir 2005) 801). We might paraphrase this sentence on making available to the public of musical performances (as well as the underlying compositions) as ‘get a licence or do not stream’. In fact, contrary to the controversial ruling in Bridgeport Music, the rules of the HCA and the CMO Act are totally bright. Streaming is subject to licensing, and the relevant making available to the public right can only be exercised for the benefit of performers by the relevant CMO. Further, no previous payment to record labels or any other entities exempts users from licensing the use and paying the necessary levies to the performers CMO.

The rulings also confirm that the extended nature of collective rights management is a proper and acceptable method of representing the interests of international performers in Hungary. The burden of proof to the contrary—especially regarding the withdrawal of any performers from the collective rights management service of EJI—lies with the person wishing to use the relevant performances.

It might be emphasized, however, that both interlocutory judgments discussed solely whether the defendant’s activity resulted in an infringement, and decided on the objective remedies, especially on the provision of data to calculate damages. Consequently, the trial will continue on the first instance on the subjective remedies, especially the exact amount of damages to be awarded.