FOURTH SECTION

Application no. 562/05 SIA AKKA/LAA against Latvia lodged on 6 August 2004

STATEMENT OF FACTS

1. The applicant, Copyright and Communication Consulting Agency/Latvian Authors ’ Association (AKKA/LAA), operates in Latvia as a collecting society which manages author ’ s copyrights.

A. The circumstances of the case

2. The facts of the case, as submitted by the applicant, may be summarised as follows.

3. At the end of 90 ’ s the applicant organisation, acting as a representative of approximately 2000 domestic and 2 million international authors who had entrusted the applicant to manage on their behalf copyrights of their works, had concluded licence agreements with bro adcasting companies in Latvia. Until 1 January 2001 the remuneration rate for the use of artistic works was set by the board of directors of the applicant organisation and afterwards it was set by the Association of Latvian Authors – the applicant ’ s sole owner. From 1998 to 1999, after the expiry of the previous licence agreements, the applicant organisation and certain broadcasting companies in Latvia could not reach an agreement on conditions of the future licence agreements, especially with regard to the amount of the remuneration to be paid for the broadcasting of music, therefore some broadcasting companies continued to use the authors ’ musical works without a written agreement either without paying a remuneration or paying it in the amount the company considered equitable. In 2002 the applicant instituted civil proceedings against several broadcasting companies operating in Latvia.

1. First set of proceedings – the applicant organisation v. Radio SWH

4. In July 2002 the applicant organisation lodged a claim against a private radio station Radio SWH and requested the Riga Regional Court to recognise that the defendant had violated authors ’ economic rights by broadcasting their works from 1 January 1999 to 31 December 2001 without a valid licence agreement. Noting that the defendant organisation broadcasted in three channels and that 60% of its programs consisted of music, the applicant organisation considered that an equitable remuneration for broadcasting of the authors ’ work was about 6% from the defendant ’ s annual income, i.e. the net turnover. It further noted that a double rate had to be applied for unauthorised use of artistic works and, adding the interest and late payment rates, the applicant claimed the compensation in the amount of about LVL 640, 000 (EUR 914 , 000). Such an approach, according to the applicant organisation, would discourage other broadcasting companies from unauthorised use of protected musical work. The applicant organisation further relied on the author ’ s exclusive rights and asked the court to apply an injunction precluding the defendant of using the authors ’ works without a licence issued by the applicant organisation.

5. The defendant lodged a counter-claim arguing that the applicant organisation had abused its dominant position and had applied unreasonably high remuneration rate which was six times the rate which was applicable for the period from 1995 to 1998. They asked the court to order the applicant to conclude a licence agreement with the defendant organisation and to establish an equitable remuneration rate.

6. During the lower court ’ s hearing the applicant organisation admitted that the parties had a dispute over the remuneration rate but that the court was precluded to establish it as long as there was no licence agreement between the parties.

7. The lower court partly upheld the claim and the counterclaim.

8. It observed that since January 1999 both parties had expressed its intention to conclude a licence agreement but that they could not agree on the amount of the remuneration. It also observed that this situation was to great extent caused by the inactivity of the applicant organisation which had been unable to define the amount of the remuneration and had constantly modified it. It relied on the provision of the law On Copyrights and Neighbouring Rights ( Par autortiesībām un blakustiesībām ) and the Copyrights Law (in force after 11 May 2005) according to which the applicant was responsible to reach an agreement with the users and not to impose unilaterally its terms and conditions to the defendant. It concluded that the applicant had failed to fulfil its functions and therefore the court was entitled to intervene, a s it was provided by section 41 part three of the Copyrights Law.

9. It further recognised that from 1 January 1999 to 31 December 2001 the defendant had infringed the authors ’ material rights by broadcasting the works without an authorisation thus violating the Copyrights Law. It also noted that the applicant organisation had failed to react to this breach and had accepted the remuneration from the defendant. When setting the amount of the compensation the court noted the applicant organisation ’ s responsibility and ordered the applicant to pay a compe nsation in the amount of LVL 78, 000 (EUR 111,500) for the period of three years, which was 1,5% of the defendant ’ s net turnover over this period. The court dismissed the applicant organisation ’ s request to apply addition interest for infringement to the author ’ s work.

10. The court also ordered the applicant to conclude a licence agreement with the defen dant. It decided that as from 1 January 2003 to 31 December 2005 an equitable remuneration for the use of the authors ’ works is to be set in the amount of 2% of the defendant ’ s monthly net turnover. In reaching the conclusion the court relied on the fact that one of the defendant ’ s programs broadcasted mainly unprotected music, and that the defendant ’ s income was made up from other economic activities carried out by the defendant.

11. Finally, by relying on the preamble of the Bern Convention which provided that a balance between public interests and authors ’ rights must be maintained, the court dismissed the applicant ’ s request to prohibit the defendant of broadcasting the work of the authors represented by the applicant organisation. By referring to the testimonies of two authors represented by the applicant organisation, the court concluded that the authors themselves were interested in public broadcasting of their work and an interdiction to reproduce their work would infringe the authors ’ exclusive rights to have their work reproduced as well as the interests of the society to use their work.

12. On 23 October 2003 the appellate court ( Augstākās tiesas Civillietu tiesas palāta ) partly upheld the claim and the counterclaim. The appellate court observed that both parties had expressed their intention to enter into the agreement. It noted that it was partly due to the applicant ’ s inconsistent decisions that the licence agreement could not be signed and therefore the defendant could not be considered as malicious. The appellate court further observed that in the draft licence agreement of October 2003 the parties had agreed on certain important terms and conditions of the licence agreement, such as the basis from which the remuneration should be paid. The court accordingly recognised that the licence agreement was to be considered as concluded in the wording as agreed by the parties in October 2003. As concerning the remuneration, the appellate court noted, inter alia , that the applicant organisation had changed the remuneration rate from 6 % to 4% and then to 3,5%, whereas the defendant insisted on 1,6%. The court took note of the characteristics of the defendant ’ s activities and concluded that an equitable remuneration would be 2%, as set by the lower court.

13. On 11 February 2004 the Senate upheld the lower court ’ s findings that it was the applicant organisation ’ s responsibility to conclude a licence agreement with the defendant. It continued that after the expiry of the earlier licence agreement on 31 December 1998 the de facto contractual relationships between the parties continued, and therefore the acts of the defendant organisation which continued to broadcast the protected works could not be considered unlawful.

14. The Senate further observed that the parties had not reached an agreement on the amount of the royalty payment and that there were no other institutions responsible to decide on the amount of the royalty payment. The Senate concluded that in such circumstances it was the court ’ s task pursuant to the Bern Convention and section 5 of Civil Law to set the remuneration rate. The Senate also dismissed the allegations that the appellate court ’ s judgment had infringed the intellectual property rights protected under the Constitution of the Republic of Latvia.

2. Second set of proceedings – the applicant organisation v. Latvijas Radio

15. In their claim against Latvijas Radio the applicant organisation asked, inter alia , the court to impose a penalty for unauthorised use of artistic work and to issue an injunction prohibiting to broadcast the works before a valid licence agreement has come into effect.

16. On 2 April 2003 the lower court dismissed the applicant ’ s claim and partly upheld the defendant ’ s claim. It considered that the de facto contractual relationships between the parties had been proven by the fact that the applicant organisation had received royalty payment from the defendant which continued to pay the rate set in the licence agreement which expired in 1999, and that the applicant organisation had not invoked objections against broadcasting of the musical works. It concluded that in the above circumstances the court only had to set the amount, as prescribed by section 41 of the Copyrights Law.

17. The appellate court diverted from the lower court ’ s findings and recognised that the defendant had infringed the copyrights by broadcasting the musical works without a valid written licence agreement. It awarded the applicant organisation compensation in the amount of LVL 100,000 (EUR 143,000) which exceeded the amount the defendants had paid based on the terms of the expired licence agreement. In setting the amount of the compensation the court took note of various factors, including the hours of the broadcasted music, the nature of the infringement. The court at the same time pointed to the applicant organisation ’ s responsibility in failing to attain a conclusion of the licence agreement and by relying on the fact that the court was going to impose an obligation to conclude an licence agreement it considered that it would be fruitless (“ nav mērķtiecīgi ” ) to issue an injunction prohibiting the defendant to broadcast the work. It further observed that the parties had not asked the court to decide on terms and conditions of a licence agreement but that over a prolonged period of time the authors ’ right were unprotected, and therefore the court considered that it should order the parties to conclude a licence agreement. By relying on its previous case-law the royalty rate was set in the amount of 3% of the defendant ’ s net turnover.

18. The applicant in the complaint of points of law argued, inter alia , that by ordering the parties to conclude a licence agreement and setting its terms the court had overstepped its powers and acted in breach of section 11bis of the Bern Convention and section 15 of the Copyrights Law.

19. On 17 March 2004 the Senate partly upheld the lower court ’ s judgment by putting forward the same arguments as in the first set of proceedings.

B. Relevant international and domestic law

1. Constitution:

20. Article 113 - the State shall recognise the freedom of scientific research, artistic and other creative activity, and shall protect copyright and patent rights.

2. Civil law

21. Section 5 provides that a judge must be guided by the general principles of law and justice when a court is called upon to adjudicate on its own discretion or when exceptional circumstances have to be taken into account.

3. Copyrights Law ( Autortiesību likums ), wording in force at the material time

22. Section 41 provides that by entering into a licence agreement the copyrights ’ subjects authorise the contracting party to use the protected work. The licence agreement sets out the conditions of the use of work, the amount of the remuneration and the payment order. Part three of the above section provides that if the licence agreement does not set out the amount of the remuneration, the latter shall be decided by the court.

23. Section 69 provides that the subjects of copyrights and related rights as well as the organisations administering the above rights and other representatives have the rights to claim the perpetrator to recognised the protected rights; prohibit the use of their work; to request immediate termination of the unlawful activities and claim damages, including the lost earning, or ask compensation in the amount set by the court.

4. Bern Convention for the Protection of Literary and Artistic Works (in force with respect to Latvia as from 11 August 1995)

24. Article 11 bis ( Broadcasting and Related Rights ) reads as follows :

“ (1) Authors of literary and artistic works shall enjoy the exclusive right of authorizing:

( i ) the broadcasting of their works or the communication thereof to the public by any other means of wireless diffusion of signs, sounds or images;

(ii) any communication to the public by wire or by rebroadcasting of the broadcast of the work, when this communication is made by an organization other than the original one;

(iii) the public communication by loudspeaker or any other analogous instrument transmitting, by signs, sounds or images, the broadcast of the work.

(2) It shall be a matter for legislation in the countries of the Union to determine the conditions under which the rights mentioned in the preceding paragraph may be exercised, but these conditions shall apply only in the countries where they have been prescribed. They shall not in any circumstances be prejudicial to the moral rights of the author, nor to his right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority.

(3) In the absence of any contrary stipulation, permission granted in accordance with paragraph (1) of this Article shall not imply permission to record, by means of instruments recording sounds or images, the work broadcast. It shall, however, be a matter for legislation in the countries of the Union to determine the regulations for ephemeral recordings made by a broadcasting organization by means of its own facilities and used for its own broadcasts. The preservation of these recordings in official archives may, on the ground of their exceptional documentary character, be authorized by such legislation. ”

COMPLAINTS

25. The applicant organisa tion complains under Article 1 of Protocol No . 1 to the Convention that by exceeding its powers and failing to balance the competing interests the national courts restricted the authors of exercising their exclusive rights to freely conclude licence agreements for the use of their musical works and to request equitable remuneration thereof.

They complain, in particular, that in the first set of proceedings against the Radio SWH the national court had substituted the necessity for a written licence agreement with de facto contractual relations; whereas in the second set of proceedings against Latvijas Radio the national courts had exceeded the limits of the claim and the counter claim, and on its own initiative ordered the parties to conclude a licence agreement as well as decided on equitable remuneration.

26. The applicant organisation further complains under Article 6 of the Convention that in the three sets of proceedings the national courts, by exceeding the limits of the claim, had applied allegedly erroneous, insufficiently reasoned and controversial interpretation and application of copyrights legislation as a result of which the national courts had restricted the authors ’ exclusive rights to freely negotiate the amount of the remuneration for the use of their work, and had substituted it with the national courts ’ rate, the calculation of which had been allegedly arbitrary and without a proper motivation.

27. Finally, the applicant organisation complains under Article 13 in conjunction with Article 1 of Protocol No . 1 to the Convention that in the proceedings against the Radio SWH and Latvijas Radio the national courts refused to grant injunction against the broadcasting companies which would prohibit them to broadcast the protected music, thus restricting the remedies available to authors in order to protect their infringed intellectual property rights.

QUESTIONS TO THE PARTIES

1. Can the applicant organisation be considered a victim of a violation under Article 1 of Protocol No. 1 in relation with Article 6 of the Convention, within the meaning of Article 34 of the Convention?

2. In the light of the authors ’ exclusive rights to negotiate the use of their work, has there been an interference with the applicant organisation ’ s peaceful enjoyment of possessions, within the meaning of Article 1 of Protocol No. 1 by the national courts decisions in the proceedings concerning the Radio SWH and Latvijas Radio ?

2.1. Was it in accordance with the conditions provided for by law, with in the meaning of Article 1 of Protocol No. 1?

2.2. If so, was that interference necessary to control the use of property in accordance with the general interest?

3. Did the applicant organisation have a fair hearing in the determination of the civil rights in accordance with Article 6 § 1 of the Convention? In particular, was the principle of equality of arms respected as regards the extension of the limits of the counter-claim in the Latvijas Radio proceedings?