Case C-516/13, Dimensione Direct Sales and Labianca – furniture adverts and the distribution right in copyright law [judgment 2015, ECLI:EU:C:2015:315]

The EU’s InfoSoc Directive 2001/29 grants authors a raft of rights to enable them to control the use of their original works or reproductions. For example, Article 4 allows an author to control ‘distribution’, ‘by sale or otherwise’. But does this mean the author’s distribution right extends as far as adverts, and if so, does it matter that no purchases actually result from the sales advert?

Facts
An Italian branch of a company called Knoll manufactures designer furniture. The company has showrooms across Europe, and its parent company is the Pennsylvanian-based ‘Knoll Inc’.

A part of Knoll’s product range includes not only specific pieces of furniture designed by Marcel Breuer but also specific pieces designed by Ludwig Mies van der Rohe.

However, the Italian company is not the only one to sell those pieces of furniture. Dimensione Direct Sales et Labianca is another Italian company which also sells those pieces as part of its product range, and it sells them direct to consumers’ homes.

The spark to this dispute is the three-pronged marketing and sales strategy of Dimensione Direct Sales and Labianca. First, it runs a website, which can be consulted in various European languages, including German. Second, it places adverts in the traditional print media; indeed, between 2005 and 2006 its adverts were regularly to be seen in several German magazines and newspapers. And third, the company also produces a sales catalogue, which in the German version also contains this little piece of text that roughly translates as: ‘Although you buy your furniture in Italy, you only pay on collection or delivery by means of a bank transfer which, if you would like, we can arrange.’

Knoll objected to Dimensione’s adverts in Germany. It sued for breach of copyright and unfair competition. In respect of its copyright claims, it asserted that the furniture was applied art, which was protected by copyright. It enjoyed exclusive rights to use those particular pieces of furniture that were designed by Breuer. Its parent company enjoyed the exclusive rights on those particular pieces of furniture that had been designed by van der Rohe. Together then, it enjoyed the exclusive rights over the right to offer the original or copies of the those particular works to the public for sale, pursuant to Article 17(1)(2) of the German Copyright Act.

Therefore, Knoll sought an injunction to stop Dimensione from offering for sale, furniture that originated from either it or its parent company, or which corresponded to the particular designs of specific designers. It also sought damages from Dimensione. At first instance, Knoll was successful but there was an appeal.

At the German Supreme Court
Knoll’s action was based on Article 17(1) of the German Copyright Act. The provision governs the control over originals or reproductions of works that are either offered to the public or put into circulation. It corresponds to the distribution right enshrined in Article 4(1) of the InfoSoc Directive (2001/29), which provides:

Member States shall provide for authors, in respect of the original of their works or of copies thereof, the exclusive right to authorise or prohibit any form of distribution to the public by sale or otherwise.

This plank of EU law was designed to offer a maximum rather than a minimum level of protection.

That said, the success of the appeal seemed to turn on three issues which to date had not been addressed in the CJEU’s case law.

The first issue was whether the ‘distribution right’ in Article 4(1) of the Directive included the right to offer the original or copies of the work to the public for sale. The German Supreme Court turned to the CJEU’s judgments, and it recalled that in Case C-456/06 Peek & Cloppenburg, the CJEU had held that there would be a distribution to the public of an original or copies only where there was a transfer of the ownership of that object. As a result, neither granting to the public the right to use reproductions of a work protected by copyright nor exhibiting to the public those reproductions without actually granting a right to use them could constitute this form of distribution.

Now according to the German Supreme Court, the CJEU’s reasoning would not preclude an assumption that an author’s distribution right included an offer to purchase either the original work or copies of it. A distribution by way of sale, within the meaning of Article 4(1) of the Directive, required a transfer of ownership. Indeed, the CJEU had said this at paragraph 36 of its judgment:

It follows that the concept of distribution to the public, otherwise than through sale, of the original of a work or a copy thereof, for the purpose of Article 4(1) of Directive 2001/29, covers acts which entail, and only acts which entail, a transfer of the ownership of that object. The information provided by the referring court shows that that clearly does not apply to the acts at issue in the main proceedings.

In view of that paragraph, the German Supreme Court noted that the inference could be drawn that the distribution right would not cover preparatory acts of transferring ownership, but it would only cover acts that were linked to a transfer of ownership of the object. Thus, an offer to acquire either the original, or reproductions of it, would constitute a ‘transfer of ownership linked to the object’ if there was an intention to transfer ownership. That would not be the case if a work was either used or exhibited and there was no such intention to transfer property. Therefore, an author’s ‘distribution right’ in Article 4(1) of the Directive might well be interpreted as including the right to offer the original or copies of the work to the public for sale.

The second issue was then whether the distribution right covered only sales contracts or extended as far as advertising. In that context, the German Supreme Court recalled the operative part of the CJEU’s judgment in C-5/11, Donner where the CJEU had held:

A trader who directs his advertising at members of the public residing in a given Member State and creates or makes available to them a specific delivery system and payment method, or allows a third party to do so, thereby enabling those members of the public to receive delivery of copies of works protected by copyright in that same Member State, makes, in the Member State where the delivery takes place, a “distribution to the public” under Article 4(1) of [the] Directive …

The German Supreme Court read this together with paragraph 26 of the CJEU’s reasoning in Donner, where it had explained:

It must be observed that the distribution to the public is characterised by a series of acts going, at the very least, from the conclusion of a contract of sale to the performance thereof by delivery to a member of the public. Thus, in the context of a cross-border sale, acts giving rise to a ‘distribution to the public’ under Article 4(1) of Directive 2001/29 may take place in a number of Member States. In such a context, such a transaction may infringe on the exclusive right to authorise or prohibit any forms of distribution to the public in a number of Member States.

The difficulty for the German court was that the CJEU had used the phrase ‘at the very least’. Now the Advocate General in that case was Niilo Jääskinen and he had said:

54. Making available to the public through sale covers the chain of activities from offers of sale through to the conclusion of sales contracts and their implementation. On the other hand, in my opinion the mere advertising of copies of copyright protected works falling short of the making of an offer for sale is not included in the exclusive distribution right of authors, even though protection extends to this under trade mark law.

In other words, he had defended the view that the author’s exclusive right would only cover acts from the sales offer but not, as the German Supreme Court put it, ‘advertising measures’.

According to the German Supreme Court, and in light of the views of the CJEU and the Advocate General, there was doubt whether the distribution right in Article 4 of the Directive covered offers to sell reproductions of the work and whether, as the case may be, such an offer would include not only contractual offers but also ‘advertising measures’. Further doubt arose as to whether the distribution right would also be infringed even where offers did not actually result in the purchase of the reproductions.

Here, the German Supreme Court flagged up its earlier judgment in Wagenfeld-Leuchte, and was minded to answer its own questions in the affirmative.

However, Article 4 of the Directive needed interpretation. Besides a literal interpretation, the provision also had to be interpreted in light of its aims and structure of the rules of which it formed a part. In that respect, Recitals 4 and 9 talked about a high level of protection. And Recital 11 talked of the need for ‘A rigorous, effective system for the protection of copyright and related rights is one of the main ways of ensuring that European cultural creativity and production receive the necessary resources and of safeguarding the independence and dignity of artistic creators and performers’.

If those goals were going to be attained, then according to the German Supreme Court’s judgment in Wagenfeld-Leuchte, and a whole host of legal commentary written by leading specialists on German copyright law, then when Article 4 referred to ‘the exclusive right to authorise or prohibit any form of distribution to the public by sale or otherwise’, it would be essential to interpret this as encompassing offering reproductions for sale.

Equally, the German Supreme Court remarked that if the aims of the Directive were going to be achieved, the distribution right should also be infringed even if the ‘advertising measures’ did not result in purchases being made at the end of the day. This was because the judges felt that a mere offer could in and of itself constitute a threat to the commercial opportunities of the right holder.

Because of the uncertainties surrounding the correct interpretation of EU law, IP law specialist President Bornkamm, and four other judges of the German Supreme Court, decided to make a reference to the CJEU.

Questions Referred
According to the UK’s Intellectual Property Office, the German Supreme Court has asked:

1. Does the distribution right under Article 4(1) of Directive 2001/29/EC include the right to offer the original or copies of the work to the public for sale?
If the first question is to be answered in the affirmative:
2. Does the right to offer the original or copies of the work to the public for sale include not only contractual offers, but also advertising measures?
3. Is the distribution right infringed even if no purchase of the original or copies of the work takes place on the basis of the offer?