Italian transport company owner Titus Donner was convicted by the Munich District Court of “aiding and abetting the prohibited commercial exploitation of copyright-protected furniture designs.” But these designs were not protected in Italy where the furniture was made, so Titus appealed all the way to the CJEU. Dr Catherine Lee reports the Luxembourg verdict.
Topic: Intellectual property
Who: Titus Donner (manager and majority shareholder of Italian transport company In.Sp.Em Srl) Criminal proceedings against Titus Donner (Case C‑5/11, 21 June 2012)
Where: Court of Justice of the European Union, Luxembourg
When: June 2012
Law stated as at: 1 July 2012
What happened:
The Italian company, Dimensione Direct Sales Srl (Dimensione) sold replica "Bauhaus" furniture and designs to German customers without having a licence to do so. The products included (at [12]):
- chairs from the Aluminium Group, designed by Charles and Ray Eames, licensed proprietor Vitra Collections AG;
- Wagenfeld lights, designed by Wilhelm Wagenfeld, licensed proprietor Tecnolumen GmbH & Co KG;
- seating, designed by Le Corbusier, licensed proprietor Cassina SpA;
- the occasional table called the ‘Adjustable Table’ and ‘Tubelight’ lamps, designed by Eileen Gray, licensed proprietor Classicon GmbH; and
- tubular steel cantilever chairs, designed by Mart Stam, licensed proprietor Thonet GmbH.
The company targeted German buyers through various forms of advertising in the German press (such as advertisements, newspaper supplements and direct mail) and supporting a German-language website (at [12]). If a German buyer placed an order, the procedure was as follows (at [14]):
- at its Italian warehouse in Sterzing, Dimensione packed the items and designated them to a buyer by marking them with the name and address of that buyer or an order number;
- buyers were requested to collect the designated items themselves or to arrange for collection. If this was not possible, Dimensione then suggested that buyers contact Titus Donner's company ("Inspem") to arrange delivery; and
- Inspem's drivers paid Dimensione for the designated items on collection from the warehouse. The drivers were reimbursed by the buyers on delivery in Germany. If the buyer refused to pay, Dimensione would take back the items and reimburse Inspem.
In respect of title to the goods, the contract between Dimensione and a buyer was governed by Italian law and accordingly ownership was transferred from Dimensione to a buyer on designation of the item at Dimensione’s warehouse (at [16]). However, under German law transfer of ownership occurred in Germany, namely when the buyer paid Inspem’s drivers for the items (at [16]).
From a copyright perspective, all of the said items are copyright-protected in Germany as works of applied art (at [13]). In Italy, however, there was no copyright protection or, alternatively, no enforceable copyright protection as against third parties during the period of relevance, namely from 1 January 2005 to 15 January 2008 (at [13]).
The German authorities prosecuted Mr Titus Donner under criminal law for his role in the distribution of the items in Germany in breach of German copyright law.
The European Community Copyright Directive (2001/29/EC) provides in Article 4 that:
- Member states shall provide authors with the exclusive right to authorise or prohibit any form of distribution of their works to the public by sale or otherwise (Article 4(1)).
- The distribution right in the Community is only exhausted if the first sale or other transfer of ownership in the Community is made by the copyright owner or with his consent (Article 4(2)).
At first instance, the Munich District Court held that Mr Donner was guilty of aiding and abetting the prohibited commercial exploitation of copyright works. He was sentenced to a suspended term of imprisonment of 2 years (at [2]). Mr Donner appealed to the German Federal Court on two grounds. First, he argued that ‘distribution to the public’ under Article 4(1) presupposed a transfer of ownership of the goods, which in the main proceedings took place in Italy, the transfer of possession of the goods, that is to say, the actual power of disposal over those goods, not being necessary in that regard (at [17]). Second, he claimed that the prosecution was a breach of Article 34 of the European Union Treaty because it was contrary to the principle of free movement of goods in that it would lead to an unjustified and artificial partitioning of the markets (at [17]).
In general terms, Article 34 prohibits quantitative restrictions on imports and exports between member states, and measures having equivalent effect. However, this prohibition is subject to Article 36, which provides that Article 34 does not preclude either prohibition or restrictions that are justified on grounds of the protection of intellectual property rights, as long as they do not constitute a means of arbitrary discrimination or a disguised restriction on trade between member states.
For this case, it was common ground between the parties that the prosecution resulted in a measure equivalent to a quantitative restriction on imports between member states under Article 34. The issue for determination in this instance was whether this could be justified under Article 36.
The Federal Court referred a number of questions to the Court of Justice of the European Union (CJEU) for a preliminary ruling. These were:
- Was there a distribution to the public under Article 4(1) of the Copyright Directive in Germany?
- Did Articles 34 and 36 of the European Union Treaty preclude a member state from bringing a prosecution under an offence of aiding and abetting such a distribution where the protected works were distributed to the public in the state in the context of a sale, which was aimed specifically at that public but concluded in another member state where the works were not copyright-protected or where the protection was unenforceable?
Question 1
Was there a distribution to the public under Article 4(1) of the Copyright Directive in Germany?
The CJEU answered this question in the affirmative.
The CJEU held that a seller who directs their advertising towards members of the public in that state and creates or makes available to them a specific delivery arrangement and method of payment (or they allowed others to do so) that enabled them to purchase copies of works protected by copyright in that state (resulting in a delivery in that state) makes a distribution to the public in a member state for the purposes of Article 4(1) (at [30]).
The CJEU then left it to the national court to determine whether there was any evidence supporting a conclusion that that trader had made a distribution to the public. In coming to a conclusion, the CJEU was of the view that the national court could take into account factors such as Dimensione’s German-language website, the content and distribution channels of its advertising materials and its co-operation with Inspem (an undertaking involved in making deliveries to Germany) as evidence of targeted activity (at [29]).
Question 2
Did Articles 34 and 36 of the European Union Treaty preclude a member state from bringing a prosecution under an offence of aiding and abetting such a distribution where the protected works were distributed to the public in the state in the context of a sale, which was aimed specifically at that public but concluded in another member state where the works were not copyright-protected or where the protection was unenforceable?
The CJEU answered this question in the negative.
Article 4 is based on different levels of copyright protection existing across the EU. In this instance, protecting the distribution right cannot be said to give rise to a disproportionate or artificial partitioning of the markets. The application of the German criminal law provisions may be considered necessary to protect the specific subject-matter of the copyright, which confers inter alia the exclusive right of exploitation. The restriction on the free movement of goods in question is accordingly justified and proportionate to the objective pursued (at [36]).
Therefore, the CJEU held that Articles 34 and 36 must be interpreted as meaning that they do not preclude a Member State from bringing a prosecution under national criminal law for the offence of aiding and abetting the prohibited distribution of copyright-protected works where such works are distributed to the public on the territory of that Member State in the context of a sale, aimed specifically at the public of that State, concluded in another Member State where those works are not protected by copyright or the protection conferred on them is not enforceable as against third parties (at [37]).
Why this matters:
From a marketing law perspective, the case is interesting because it provides guidance on the application of Article 4(1) in respect of two aspects of cross-border distance-selling arrangements. First, a significant factor in establishing liability is evidence that the trader has targeted consumers in the relevant member state with advertising and specific delivery and payment options. Accordingly, questions of where the sale is concluded or where the transfer of ownership takes place are not considered as relevant to distribution by sale under Article 4(1). Second, the case is a useful illustration of how far a trader may be liable under Article 4(1) for authorising the distribution activities of third parties.
