Case C-367/15, Stowarzyszenie “Oławska Telewizja Kablowa – punitive damages and copyright infringers [judgment 2017, ECLI:EU:C:2017:36]

Where national law entitles a copyright owner to compensation from a copyright infringer that is two or three times the cost of the licence which the infringer should have paid in the first place, is that national law compliant with the EU’s ‘enforcement’ Directive 2004/48/EC?

Background
Poland has a copyright collecting society that is specialised in collecting money in respect of audiovisual works, cable television and acts of retransmission. It is the Stowarzyszenie “Oławska Telewizja Kablowa.

Company ‘O’ has been distributing television programmes via cable TV in a region of Poland. However, the TV cable company failed to sign an agreement with the Polish collecting society in respect of the company’s use of the copyright-protected audiovisual works in the programmes. Accordingly, the company was sued in 2009 for copyright infringement.

The collecting society pointed out that under Article 79 of the Polish Copyright Act, a copyright holder whose rights have been infringed is entitled to compensation that is equivalent to an amount which is two or three times that which the infringer would have had to have paid for a licence in the first place.

However, the company is challenging the legality of the relevant provisions in the Polish Copyright Act, and claims that Polish law does not comply with EU law. The dispute has escalated up to the Polish Supreme Court.

At the Polish Supreme Court
The judges turned to the applicable legislation, the EU’s ‘enforcement’ Directive 2004/48/EC on the enforcement of intellectual property rights (OJ [2004] L157/45).

The salient provision of the Directive is Section 6 headed ‘Damages and legal costs’. Article 13 on ‘Damages’, stipulates:

1.Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.
When the judicial authorities set the damages:
(a) they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;
or
(b) as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.
…

It is a provision which must be read in light of Recital 26, which reads:

With a view to compensating for the prejudice suffered as a result of an infringement committed by an infringer who engaged in an activity in the knowledge, or with reasonable grounds for knowing, that it would give rise to such an infringement, the amount of damages awarded to the rightholder should take account of all appropriate aspects, such as loss of earnings incurred by the rightholder, or unfair profits made by the infringer and, where appropriate, any moral prejudice caused to the rightholder. As an alternative, for example where it would be difficult to determine the amount of the actual prejudice suffered, the amount of the damages might be derived from elements such as the royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question. The aim is not to introduce an obligation to provide for punitive damages but to allow for compensation based on an objective criterion while taking account of the expenses incurred by the rightholder, such as the costs of identification and research.

Consequently, the Polish Supreme Court is wondering whether it is possible under EU law to award an amount, a pre-set lump sum payment, which is two or three times that of the initial licence. First, Article 13(1)(a) sets out the circumstances which national judges must take into account. Second, Article 13 (1)(b) indicates a lump sum may only be awarded in the alternative, and then only in accordance with the elements mentioned in Article 13(1)(b). And third, if a pre-set lump sum payment is two or three times that of the original licence fee, then perhaps Polish law also needs to be read in light of what the Directive says about punitive damages. After all, Recital 26 states that: “the aim [of the Directive] is not to introduce an obligation to provide for punitive damages but to allow for compensation based on an objective criterion while taking account of the expenses incurred by the rightholder, such as the costs of identification and research.”

Questions Referred
The Curia website has not yet published the official questions asked by the Polish Supreme Court.

Update – 21 July 2015
The issue of how a court should determine the level of compensation under Article 13 of the EU’s ‘enforcement’ Directive but in the context of the EU’s legal regime governing plant rights, is also at stake in Case C-481/14, Jørn Hansson – Daisy! Daisy! Give me eight answers do!