Opinion of Mr Advocate General La Pergola delivered on 26 May 1998. - Foreningen af danske Videogramdistributører, acting for Egmont Film A/S, Buena Vista Home Entertainment A/S, Scanbox Danmark A/S, Metronome Video A/S, Polygram Records A/S, Nordisk Film Video A/S, Irish Video A/S and Warner Home Video Inc. v Laserdisken. - Reference for a preliminary ruling: Retten i Ålborg - Denmark. - Copyright and related rights - Videodisc rental. - Case C-61/97.

European Court reports 1998 Page I-05171

Opinion of the Advocate-General

I - The factual and legislative context of the main proceedings and the subject of the question referred by the national court

1 Retten i Aalborg (Aalborg Court) has asked the Court, pursuant to Article 177 of the EC Treaty, to provide it with the necessary interpretation on the following question:

`Does Article 30 of the EC Treaty [hereinafter the "Treaty"], in conjunction with Article 36, or Articles 85 and 86, preclude a person to whom the holder of the exclusive rights to a film has transferred an exclusive manufacturing and distribution right in respect of copies of the film in one Member State from giving consent to the rental of his own releases while at the same time preventing the rental of imported releases which have been placed on the market in another Member State, where the holder of exclusive manufacturing and distribution rights in copies of the film has transferred ownership of copies with tacit acceptance that the copies will be rented out in that latter Member State?

In view of the fact that Council Directive 92/100/EEC of 19 November 1992 on rental right and lending right and on certain rights related to copyright in the field of intellectual property [hereinafter the "Directive"] (1) has entered into force, the same question is repeated on the basis that the Directive is applicable to the reply.'

This Court has thus been asked by the national court to add a further piece to the mosaic of problems surrounding rental right - understood as the right to make a creative work incorporated in a material object available for use for a limited period of time - which is one of the rights conferred on any copyright holder. (2) The principle that a right is exhausted when the product in which the protected work is embodied has been put into circulation in Community territory for the first time, by sale, is not applicable to rental right. That was established by the Court in its judgment in Warner Brothers (3) and was subsequently given legislative force in the Directive. In the ruling requested by Retten i Aalborg, the Court must now decide whether it is also the case when the first distribution of the product in question takes the form of rental.

2 The facts in point in the main proceedings, as set out in the order for reference, may be summarised as follows. Laserdisken, the defendant in the present case, is an undertaking with its head office in Aalborg, which distributes films on videodisc (that is to say on laser discs, which afford high-fidelity reproduction). (4) Laserdisken imported the videodiscs direct from the United Kingdom, where they had been lawfully manufactured by certain companies under licence. The products in question were not, and are still not, released in Denmark either by the holder of the copyright in the works in question or by third parties with their consent, although they are available on video-cassette (see point 3 below). From 1987, Laserdisken offered copies of the imported videodiscs for rental as well as sale. The undertaking hoped in this way to promote sales of the products in question, which are very expensive - particularly compared with the same work on video-cassette - and as a result are mainly purchased by people who have already seen and enjoyed the work. According to the order for reference, the holders of the copyright for the United Kingdom in the works reproduced on the videodiscs in question had in fact allowed them to be rented out in United Kingdom territory after the initial sale. This continued to apply, even in the case of copies offered for sale after 1 August 1989, when the Copyright, Designs and Patents Act 1988 entered into force, the important point of which, for the purposes of the present case, was that it conferred an exclusive rental right on makers of films (see sections 16-18). (5) This point is contested by the plaintiffs in the present case, who claim that they never, tacitly or otherwise, authorised the rental of videodiscs in the United Kingdom or any other Member State, though they also maintain that this is irrelevant for the purpose of determining whether the exclusive rental right in Danish territory is exhausted (see point 4 below). It is common ground, however, that Laserdisken did rent out the products in question in Denmark without first obtaining the plaintiffs' permission.

3 In January 1992, Foreningen af danske Videogramdistributører (the Association of Danish Video Distributors, hereinafter `FDV') brought an action against Laserdisken for breach of Article 23(3) of the Copyright Law, (6) under which `where a film is released in the form of sale to the public, copies covered by the release may be distributed further. However, they cannot be distributed to the public by way of lending or rental without the copyright holder's consent' (free translation). FDV represents eight companies, (7) which have variously acquired exclusive licences to produce and distribute in Danish territory, in any form (i.e. including videodiscs), copies of most of the films that Laserdisken distributed on videodisc, dubbed into Danish. The national court has pointed out that the plaintiffs rented the works in question out on the Danish market on video-cassette (i.e. in a different material form). According to statements made by Warner in the procedure before the Court, it was FDV, acting on behalf of the companies belonging to it, that negotiated the terms of sale to dealers of the video-cassettes for which the companies had acquired the copyright. The standard contracts concluded with the various dealers by FDV included specific clauses restricting the right of distribution by rental and expressly prohibiting `chain' rental. An injunction issued by the Fogedret (Bailiff's Court) in February 1992 and upheld on appeal by the Vestre Landsret (Western Regional Court) in September of that year prohibited Laserdisken from continuing to rent out the products at issue and ordered FDV to provide security of DKR 1 000 000 for the damage and inconvenience which might be caused by the injunction. It is in the context of the judgment upholding that injunction that Retten i Aalborg has asked the Court to give a preliminary ruling.

II - Arguments of the parties

4 FDV and the companies it represents, citing the judgment in Warner Brothers, point out that the Danish copyright law they rely on in the present case is not intended to prevent or restrict imports of videodiscs from the United Kingdom for resale in Denmark. They also claim that, even though cross-border trade in the audiovisual products in question is subject to the Treaty rules on free movement of goods, any exercise of rental right should be regarded - like public performing rights - as a provision of services and that it constitutes a way of exploiting the protected work that is very different from selling the product embodying that work. They claim that the right to control all the options for renting copies that have been sold is an inherent part of the specific subject-matter of copyright, the protection of which may in principle, under the terms of Article 36 of the Treaty, justify measures having equivalent effect to quantitative restrictions that would otherwise be contrary to Article 30. (8) Rental right is consequently inherently exempt - at both national and Community level - from the principle that an exclusive right is exhausted when a product has been put into circulation for the first time, whether by sale or rental. It follows that - irrespective of whether the goods in question have been imported and even supposing that they have been rented out in the United Kingdom with the tacit consent of the copyright holders - Laserdisken nevertheless rented them out in Denmark without having first obtained consent, express or tacit, from the lawful proprietors of that right.

5 According to FDV, the fact - cited by the defendant - that the companies it represents allowed the films in question to be rented out in Denmark in a different form (video-cassette), is completely irrelevant. In view of the nature of the right in question, the author may, first of all, when the protected work is sold, simply prohibit outright any subsequent rental of the work in question. If he should decide later to authorise the renting out of individual copies, he would be entitled to maximise the profits on the commercial exploitation of the work by attaching territorial restrictions or time-limits to any licence he might issue in this connection, or by issuing a licence to one person only (an exclusive licence), or by limiting it to a specific material form. Thus, for the purposes of the present case, the author could, for example, agree to the rental of a film recorded on video-cassette but not on videodisc. (9) The exclusive rental right is therefore infringed - so the plaintiffs argue - whenever a copy of a video-cassette or videodisc is rented out without the consent of the copyright holder. If Laserdisken's argument were to be accepted, tacit or presumed consent by the author in one Member State would deprive the person concerned of the right to restrain rental of copies of the protected work in the importing Member State, even though that right has been conferred on him in that State. The result would therefore be to deprive the author of remuneration reflecting the actual number of rental transactions, contrary to what was held by the Court in Warner Brothers. These views are substantially shared by the Danish, French, Finnish and United Kingdom Governments and by the Commission. (10)

6 According to Laserdisken, supported by the interveners in the main proceedings, (11) the Danish law on copyright allows rightholders to restrain the rental of videodiscs, but only imported videodiscs, not those produced in Denmark. As it is a means of arbitrary discrimination and disguised restriction on intra-Community trade, that law cannot be justified under the terms of Article 36 of the Treaty. The defendant also points out that even the Directive - although the text provides that rental right is not exhausted by any sale or other act of distribution of copyright works (see Articles 1(4) and 9(3)) - does not state whether the right to restrain subsequent rental must be held to be exhausted once the copyright holder has authorised the rental of copies. Laserdisken considers that it must. It contends that the Directive is intended to establish an internal market characterised by full and free commercial competition. Consequently, it adds, just as a distribution right is exhausted when the author has given his consent to the first sale, so too a rental right is exhausted, with effect throughout Community territory, when the first rental has been authorised in any Member State. According to Laserdisken, that view is also consistent with the general principle, which it deduces from the case-law of the Court, (12) that consent entails exhaustion. It contends that the judgment in Warner Brothers too is based on that principle. In that case, the right to prohibit the hiring-out on the Danish market of video-cassettes imported from the United Kingdom could not be considered exhausted because the copyright holder or his assigns had never given their consent to hiring-out in the exporting State (nor could they, as there was no provision for it in law at the time). Moreover, it would be contrary to the objectives of the Directive to hold that consent to rental could be given for only one Member State and not for all the others (just as, within a Member State, consent could not be limited to part of its territory).

III - The answer to the question

Examination with reference to Articles 30 and 36 of the Treaty

7 In the observations they have submitted to the Court, the parties, the Commission and the intervening national governments have all referred in one way or another to the principles established by the Court in Warner Brothers. (13) As in the main proceedings in the present case, so too in Warner Brothers, the question was raised of compatibility between the exclusive rental right granted under Danish copyright legislation (see point 3 above) and the Treaty provisions on free movement of goods, with reference to a case in which videograms lawfully purchased in the United Kingdom were hired out in Denmark without authorisation. The Court held, first of all, that the law in question, which enables the author or producer of a cinematographic work reproduced on video-cassette to prohibit the hiring-out of videograms of that work in national territory, was `liable to influence trade in video-cassettes [in the Member State in question] and hence, indirectly, to affect intra-Community trade in those products'. The Court therefore took the view that it was a measure having an effect equivalent to a quantitative restriction, which is prohibited by Article 30 of the Treaty (paragraph 10). The Court then proceeded to examine whether such a restriction might be considered justified in that particular case on grounds of the protection of industrial and commercial property within the meaning of Article 36, noting in this connection that the Danish legislation applied without distinction to video-cassettes produced in situ and video-cassettes imported from another Member State and that it did not therefore operate any arbitrary discrimination in trade between Member States (paragraphs 11 and 12). I consider that these principles are clearly applicable to the present case also.

8 In its judgment in Warner Brothers, the Court mentioned other factors determining a specific rental right, which is an inherent part of the specific subject-matter of copyright, and its implications for the free movement of goods and I propose to offer some further considerations on that subject. However, before proceeding with my examination of those factors (see point 12 below), I feel a few brief remarks are called for, to place that judgment in the wider context of the justification for the principle of exhaustion of copyright and the scope of that principle.

9 As with trade-mark or patent law, the rule of (national) exhaustion of copyright - or, to be more precise, the exclusive right of distribution (or putting into circulation) - provided for in the legal systems of many Member States is justified on the principle that when the rightholder (or others with his consent) places the product on which the copyright work is reproduced on the market, by sale, he receives once and for all the consideration due to him in return for that reproduction. In the context of the single market, the Community case-law on the application of Article 36 of the Treaty has been concerned, in order to stimulate invention and creative activity and encourage the opening up of new markets, to reconcile the exclusive rightholder's needs with the general interest in the free movement of the products in question. (14) The Court has consequently accepted the principle of the automatic exhaustion of the right in question throughout Community territory, so as to avoid the situation where - because of the territorial nature of national legislation on industrial, commercial and intellectual property - the remuneration payable to the exclusive rightholder when the product is first put into circulation has to be paid again simply because the product embodying his inventive or creative powers is resold in a Member State other than the Member State in which it was first sold. (15) Moreover, the opposite principle, which would legitimise the isolation of national markets, would be repugnant to the essential purpose of the Treaty, which is to unite national markets into a single market. (16)

10 The principle of exhaustion cannot however be applied to exclusive performing rights - that is, to the right to communicate the protected work to the public, either directly through live performers (as in the case of a theatrical performance) or through material forms of the work (for example, by broadcasting a record on radio or showing a film on television or in the cinema) - or generally to copyright in work for which communication to the public does not require circulation in material form. In this case, the exploitation of the work does not conflict with the free movement of goods and placing the work on the market cannot therefore serve as a criterion for determining the scope of the exclusive right. (17) As successive performances of the work are independent of one another, the right cannot be regarded as exhausted after the first performance. Each performance, embodying afresh the `commercial essence' of the work, (18) is a separate act of exploitation generating a right to remuneration. The law protects that right, which `is part of the essential function of copyright in this type of literary and artistic work', by making the exercise of the right conditional upon the holder's consent. (19)

With specific regard to the rights of the holder of the performing right in a cinematographic film, the Court also had occasion to rule that the exploitation of copyright in films and the fees attaching thereto `cannot be regulated without regard being had to the possibility of television broadcasts' of those films. Such broadcasts may therefore lawfully be prohibited for a certain period of time, during which the film may be shown only in cinemas. (20) In view of the `imperative need' to encourage the creation of cinematographic works, the national systems of the Member States may therefore - without infringing the Community rules on free movement of goods - give priority for a limited initial period to the distribution of such works through the cinema, such protection being considered necessary in the interests of the profitability of cinematographic production, as against distribution of the works in question by other means, in particular through video-cassettes. (21)

11 Where the public performance of a work requires the use of a material form of that work (for example, a recording of a musical work played in a discotheque), `the requirements relating to the free movement of goods and the freedom to provide services and those deriving from the observance of copyright must be reconciled in such a way that the copyright owners ... may invoke their exclusive rights in order to require the payment of royalties', even though the marketing of that recording cannot give rise to the charging of any royalty in the country where the music is played in public, as royalties have already been paid to the author in another Member State. (22) The Court therefore recognised that an author's right to control the public performance of a recorded work reserved for private use, in order to charge a supplementary reproduction fee, does not conflict with the free movement of goods, except in so far as the right is invoked in order to impose on the purchaser of copies of the work restrictions as to their use that may restrict their circulation. (23)

12 A similar distinction may be drawn between the right to put recordings of a cinematograph work (videograms) into circulation and the right to hire out the works recorded on them, as the Court had occasion to observe in Warner Brothers. The Court went into some detail on the gradual but complete `emergence' of a specific market for the hiring-out of video-cassettes, as distinct from their sale. It observed that that market `reaches a wider public than the market for their sale and, at present, offers great potential as a source of revenue for makers of films' (paragraphs 13 and 14). (24) It therefore held that specific protection of the right to hire out video-cassettes is clearly justified to guarantee to makers of films a remuneration which reflects the number of occasions on which the video-cassettes are actually hired out and which secures for them a satisfactory share of the rental market. However, it considered that that could not be guaranteed by `authorising the collection of royalties only on sales to private individuals and to persons hiring out video-cassettes' (paragraph 15). That would penalise the author unduly by requiring him to specify, when his work is placed on the market for the first time, all the uses to which it might subsequently be put. (25) It follows that - without prejudice to the right to remuneration when the material form of the work is first put into circulation - the right to receive a royalty each time the work is hired out is part of the specific subject-matter of the author's copyright in a film recorded on videogram (on a par with his right to receive a royalty for each public performance of the work). (26) Thus the Court held, in that judgment, that the exclusive rental right provided under the legislation of one Member State (in that case, Denmark) is not exhausted when the owner of the copyright chooses to offer the video-cassette of his work for sale for the first time in another Member State (in that case, the United Kingdom), whose legislation - as in the case at issue on that occasion - confers no such right on the copyright holder. Unlike Advocate General Mancini, (27) the Court took the view that the acquisition by a third party of rights in the product in which the work is incorporated (i.e. the corpus mechanicum) does not mean that the intellectual property rightholder loses all his rights, concluding that `where national legislation confers on authors a specific right to hire out video-cassettes, that right would be rendered worthless if its owner were not in a position to authorise the operations for doing so' or to restrain them (paragraphs 17 and 18). (28)

13 In my view, it should now be considered whether those principles are transposable in toto to the dispute pending before Retten i Aalborg or whether, on the contrary, a different conclusion must be reached in the light of two factors mentioned by Laserdisken. In the present case, the holders of the copyright for the United Kingdom in the works reproduced on the videodiscs did not exercise their own rental right, which had been introduced into the United Kingdom legislation in the meantime, to restrain the unauthorised operations of the United Kingdom dealers. Consequently, - according to the defendants - the tacit consent to the rental of the videodiscs in United Kingdom territory, together with their initial sale, exhausted the rental right in the other Member States also.

14 In my opinion, these two respects in which the factual and legislative context in the present case differs from that in Warner Brothers, although undoubtedly relevant, ought not to lead the Court to accept the arguments advanced by Laserdisken. The starting-point for the answer to the question referred by the national court must be the principle established by the Court 10 years ago, namely that rental right, although potentially constituting a barrier to the circulation of videograms between the Member States, is not exhausted when such products are put into circulation in Community territory. I have already examined the reasons for that rule. The author's right to control the exploitation of the work in the secondary market does not authorise him to erect barriers to the importing or resale of the goods in question. That is why, in striking a balance between the two competing interests, his interest in receiving an appropriate return as a basis for his future creative and artistic activities takes precedence over the general interest in the free movement of videograms between the Member States, including their availability for rental at a price substantially lower than the sale price.

15 That being said, it should be noted that the exclusive right to make individual copies of the work reproduced on videogram available for use for a limited period of time is inherently open to exploitation through repeated and potentially unlimited operations, each of which gives rise to a right to royalties. Consequently, when the author decides to assign the rental right, by means of a contractual licence, he may legitimately limit that licence to a specific material form, a certain period of time or a particular geographical area, so as to maximise the profits on the commercial exploitation of the work through rental. Now, it is impossible to see how authors and producers could receive reasonable remuneration for their intellectual work or a fair return on their investment if third-party traders (such as Laserdisken in the present case) were to be able, simply by invoking the exhaustion of the copyright holder's rental right in the absence of a licence agreement, to authorise the use of the videograms, for consideration, by the public and in particular by consumers in a Member State other than the Member State in which they were first rented out. The result would be to deprive the lawful proprietors irremediably of a profit on their intellectual work to which they are entitled. It cannot therefore be accepted that rental right must be exhausted after it is exercised for the first time, with the result that the rightholder would have no control over any subsequent rental of the product even in Member States in which the right to make it available for use had not been assigned by means of licence agreements. I need hardly add that automatic exhaustion of rental right following the first rental of the product is not the rule at Community level, primarily because - save as otherwise provided by law - there is no such provision in the national legislation of the State in which the product is first rented out. (29) The copyright holder may therefore restrain unauthorised rental of his work even if he has himself rented it out for the first time in his own country. Lastly, if Laserdisken's arguments were to be accepted, it would have the effect of depriving the author of the right - which follows from the Court's judgments in Coditel and Cinéthèque (30) - to control the sequence in time of the various forms of distribution of a cinematographic work, which is a corollary of the right to prohibit, during the period of grace reserved for distribution in cinemas, the marketing through rental of video-cassettes of the same film imported from other Member States in which the period of grace has already come to an end.

Examination with reference to the Directive

16 As the plaintiffs, the `intervening' national governments and the Commission have all observed, the solution I propose is corroborated rather than contradicted by the relevant provisions of the Directive (see below), which in fact harmonised the Member States' national legislation on rental right (as well as lending right) on the lines suggested by the Danish legislation. In mentioning this, I must however point out that the solution proposed by the Community legislature is in my opinion, technically at least, irrelevant for the purposes of the present case in that, pursuant to Article 13, the provisions of the Directive became applicable on 1 July 1994, that is to say after the Danish courts issued the injunction against Laserdisken. As we know, the Directive draws a distinction between the effects of the rental right per se (see Article 1(4)) and those of the distribution right (that is to say, the `exclusive right to make available these objects [fixations], including copies thereof, to the public by sale or otherwise'), which is regulated in Article 9(2) and (3). (31) Only the distribution right is exhausted with the first sale in the Community of one of the objects in question by the rightholder or with his consent. The rental right, on the other hand, is not exhausted by any sale or other act of distribution of those objects. It is precisely because the purpose and scope of the two rights are different that the Court held - in its recent judgment in Metronome - that the introduction by the Directive of an exclusive rental right cannot constitute any breach of the principle of exhaustion of the distribution right. (32)

Examination with reference to Articles 85 and 86 of the Treaty

17 To complete the legal examination required to answer the question referred by the national court, it now remains to be seen whether there may have been a breach of Articles 85 and 86 of the Treaty in this case. However, this appears to me to be an impossible task, since the statement of reasons contained in the order for reference does not give even a brief account of the plaintiffs' conduct, which the national court asks the Court to assess in respect of its effect on competition. The order for reference does not identify any of the allegedly anti-competitive agreements or concerted practices (could these be the licence agreements between the plaintiffs and the producers? or possible horizontal agreements between the

plaintiffs belonging to the FDV?) or any conduct constituting abuse by the plaintiffs of the dominant position they are supposed, collectively, to hold (could this simply be their refusal to allow Laserdisken to rent out the imported videodiscs? or their alleged refusal even to assign it the right to make video-cassettes produced by the plaintiffs available for use?). In the question referred by the Danish court, any such agreements and/or conduct are, in fact, mentioned only in very general terms. They apparently consist of giving consent to the rental of his own products (video-cassettes), while at the same time preventing the rental of imported products (videodiscs) which have been offered for rental in another Member State by a third party (not the importer) with the tacit consent of the holder of the exclusive manufacturing and distribution rights. But this - at least in the absence of further details - is precisely what, in law, the exclusive rights conferred on the author and his assigns allow them to do in the circumstances as described (acquisition of an exclusive rental right by means of a licence agreement). I should explain, that in making this comment, I have no wish to deny the relevance of the competition rules for the purpose of the task, incumbent on the national court, of determining whether the factual and legislative context of the present case is compatible with Community law. It seems to me to be patently clear, for example, as Laserdisken has stated in the course of the procedure, that if the plaintiffs were to exercise their exclusive rental rights in a negative manner, solely in order to prevent the development of a videodisc rental market in Denmark - with the result that the Danish consumers concerned would be obliged to purchase, at a high price, products that they would prefer to rent -, then that conduct would be liable to distort competition on the market. (33) I therefore consider that, in the present case, Retten i Aalborg has not fully defined the factual and legislative context of this limb of its question and the Court is consequently not in a position to provide it with a useful interpretation of Articles 85 and 86. (34) That conclusion does not affect the right of the national court to seek the Court's interpretative assistance again, should it feel the need to do so, by referring further questions for preliminary ruling in the context of the same case.

IV - Conclusion

In the light of the foregoing considerations, I propose that the Court give the following answer to the question referred by Retten i Aalborg:

Copyright legislation of a Member State, which allows the holder of the production and distribution rights in a film, or the person to whom he has granted an exclusive licence in that Member State, to prevent videograms imported from another Member State from being rented out by a third party without authorisation, even if the copyright holder has put them into circulation by sale in the exporting State and has tacitly agreed that copies sold may be rented out in that State, is compatible with Articles 30 and 36 of the Treaty and remains so even after 1 July 1994, when Council Directive 92/100/EEC of 19 November 1992 on rental right and lending right and on certain rights related to copyright in the field of intellectual property came into effect.

(1) - OJ 1992 L 346, p. 61.

(2) - As we know, copyright comprises a number of proprietary and moral rights, which are independent of one another. Consequently, the exercise of one of them does not preclude the exclusive exercise of any of the others (see M. Fabiani, `Normativa CEE e diritto di autore sul noleggio di videocassette', in Diritto d'autore, 1990, p. 433, in particular p. 440, and M. Röttinger, L'épuisement du droit d'auteur, in Revue internationale du droit d'auteur, 1993, p. 50, in particular pp. 53-55).

(3) - Case 158/86 Warner Brothers and Another v Christiansen [1988] ECR 2605; see points 7 and 12 below.

(4) - The videodisc is defined in the Ztek Co. Catalog Multimedia Glossary (http://www.xkt.com/BIBGLOS/glossary.html) as follows: `An eight or twelve-inch circular optical storage medium which can contain both video and audio. Videodiscs come in two different formats, Constant Linear Velocity (CLV), the extended play format most commonly used for linear applications such as movies, concerts, etc. which allows for recording up to 60 minutes of motion video on each side of a 12-inch disc, and Constant Angular Velocity (CAV), the standard play format most commonly used for interactive applications, in which a 12-inch disc will hold 54,000 video frames, each frame can be addressed and presented individually, and up to 30 minutes of motion video with sound can be contained on each side of a 12-inch disc. Images on a videodisc are stored in an analog format. Audio can be stored on digital or analog audio tracks. A videodisc has several advantages over a videotape including higher image quality, durability, and rapid search capabilities, and the information on a videodisc cannot be erased.'

(5) - Before that date, the Copyright Act 1956 did `not confer any right of dissemination in the United Kingdom on the author or producer, so that the purchaser of a film recorded on videocassette may hire it out in the United Kingdom without the consent of the owner of the exclusive rights' and he will not be able to demand compensation unless there is a clause in the contract of sale which expressly obliges the purchaser to refrain from hiring out the recording (see Warner Brothers, cited in note 3, pp. 2606 and 2619). As the United Kingdom Government observed in the procedure before the Court in the present case, since August 1989, copyright holders supply the videogram dealers with copies specifically intended for hire, at a higher price than the price charged for copies that are to be sold.

(6) - Law no 158 of 31 May 1961, as amended by Law no 274 of 16 June 1985. The relevant provision now is Article 19(1) and (2) of Law no 395 of 14 June 1995.

(7) - Namely, Warner Home Video (hereinafter `Warner'), a branch of the Californian company Time Warner Entertainment, and seven companies incorporated under Danish law, Egmont Film, Buena Vista Home Entertainment, Scanbox Danmark, Polygram Records, Nordisk Film Video, Irish Video and Metronome Video (at the time of the events that are the subject of these proceedings, the last-named company held an exclusive licence for rights to the production and distribution in Denmark of video-cassettes of films for which Warner holds the home video distribution rights; those rights covered the sale of items produced after an 18-month period of grace from the time when the video-cassettes were released in Denmark for rental only).

(8) - See Case 58/80 Dansk Supermarked v Imerco [1981] ECR 181, paragraph 11.

(9) - That right is, they claim, similar to the right of the author of a film to decide the number, order, form, time and place of every public showing (for example by setting different terms and conditions for showing in cinemas and broadcasting on television, on channels for which viewers must pay or channels that are free of charge). The lawfulness and extent of such periods of grace, which vary in length from one Member State to another (depending in each case on time required for dubbing or subtitling, peak periods in the film season, and the strength of the competition from other forms of distribution) has in their view been recognised by the Court in its judgments in Case 262/81 Coditel and Others v Ciné-Vog Films and Others [1982] ECR 3381 and Joined Cases 60/84 and 61/84 Cinéthèque and Others v Fédération nationale des cinémas français [1985] ECR 2605.

(10) - For the sake of brevity, I have deliberately chosen not to mention in the foregoing paragraphs - or indeed in my summary of Laserdisken's observations (see point 6 below) - the arguments concerning the requested interpretation of Articles 85 and 86 of the Treaty. I consider, in fact, that the Court is not in a position to give a useful answer to this part of the question referred by the national court, since it has not explained, either briefly or by reference, the exact reasons that led it to ask for an interpretation of the said provisions in connection with the circumstances of the dispute and the national legislation (see point 17 below). It is no accident that the reference to the rules on competition in the order for reference was understood differently by the parties in the main proceedings, the national governments and the Commission - this is clear from the observations they submitted to the Court, which examined now one, now another of the agreements and practices that might in theory be relevant (while the French Government, for its part, raised the separate issue of the compatibility of the Danish legislation with the rules on competition in conjunction with Article 5 of the Treaty).

(11) - Namely, the Sammenslutningen af Danske Filminstruktører (Union of Danish Film Directors), Mr Michael Viuf Christiansen (representing the estate of his father, Erik Viuf Christiansen, defendant in the main proceedings in Warner Brothers), Mr Jensen, a videogram dealer who was declared bankrupt following FDV's termination in 1991 of a previous product rental licence agreement, and Pioneer Electronics Denmark, a company with interests in the distribution of videodisc players.

(12) - In particular, Dansk Supermarked v Imerco, cited in note 8 above.

(13) - Cited in note 3 above.

(14) - See B. Castell, L'`épuisement' du droit intellectuel en droits allemand, français et communautaire, Paris, 1989, in particular p. 131.

(15) - See C. Dautrelepont, Les arrêts Coditel face au droit interne et au droit européen, in Journal des Tribunaux, 1984, p. 397, in particular p. 407.

(16) - See ex multis, Case 78/70 Deutsche Grammophon v Metro [1971] ECR 487 and Dansk Supermarked v Imerco, cited in note 8 above.

(17) - See V.-L. Benabou, Droits d'auteur, droits voisins et droit communautaire, Brussels, 1997, in particular p. 100.

(18) - See B. Edelman, commentary on the judgment in Warner Brothers, in J.C.P., Éd. gén., 1989, II, p. 21173.

(19) - See Case 62/79 Coditel and Others v Ciné-Vog Films and Others [1980] ECR 881, paragraphs 12-14, and Case 395/87 Ministère public v Tournier [1989] ECR 2521, paragraph 12.

(20) - Case 62/79, cited in note 19 above, paragraphs 13 and 14. The Court added that assignment of the right to perform the work by showing it on television may be limited by agreement to the territory of one Member State without breaching the Treaty provisions on freedom to provide services. The judgment in question also stated quite clearly that the Court's decision related to a situation - which existed at that time in the Member States - `where television is organised ... largely on the basis of legal broadcasting monopolies, which indicates that a limitation other than the geographical field of application of an assignment is often impracticable'.

(21) - On two conditions, first, that the prohibition on the exploitation of video-cassettes during the initial period reserved for showing in cinemas applies to domestically produced and imported cassettes alike and, second, that any barriers to intra-Community trade to which its implementation may give rise do not exceed what is necessary to achieve the end in view (see judgment in Cinéthèque and Others v Fédération nationale des cinémas français, cited in note 9 above).

(22) - Ministère public v Tournier cited in note 19 above, paragraph 13, and Case 402/85 Basset v SACEM [1987] ECR 1747.

(23) - See T. Desurmont, `Le droit de l'auteur de contrôler la destination des exemplaires sur lesquels son oeuvre se trouve reproduite', in Revue internationale du droit d'auteur, 1987, p. 3, in particular p. 61.

(24) - The Court held that the existence of that market was made possible by various factors such as `the improvement of manufacturing methods for video-cassettes which increased their strength and life in use, the growing awareness amongst viewers that they watch only occasionally the video-cassettes which they have bought and, lastly, their relatively high purchase price' (Warner Brothers, cited in note 3 above, paragraph 14).

(25) - See Benabou (op. cit. in note 17 above, p. 131), who argues that the difficulty of making such provision is all the greater because of the very rapid increase in diffusion options resulting from technological advances.

(26) - See G. Bonet, commentary on the judgment in Warner Brothers, in Revue trimestrielle de droit européen, 1988, p. 647, in particular p. 652.

(27) - According to the Advocate General, the assimilation of the hiring-out of a film - as an essentially repetitive form of commercial exploitation - to its public performance is unfounded. He observed, however, that they none the less have the common characteristic that they `necessarily involve making the product commercially available to the consumer'. `Once the maker of a film has sold the cassette to a third party, thereby transferring permanently his proprietary right over the recording and permitting it to circulate freely, he may not thereafter avail himself of the provisions of another State so as to assert his exclusive right over the work recorded on the cassette and thereby in practice prevent it from entering that State. Such a claim is motivated by the same economic interests which underlay the original disposal of the work; and, if that is so, the claim must yield to the rule under Article 30. ... To argue to the contrary would imply taking away from consumers, in this case from Danish citizens, what they may obtain as of right under the Treaty' (original italics). He suggested that the exhaustion of the film maker's right to restrain the hiring-out of video-cassettes he has put into circulation in Community territory was tempered by recognition of the right to fair compensation or some other form of protection and the possibility for the author to safeguard his position `by inserting appropriate clauses into the contract of sale' (Advocate General's Opinion delivered on 26 January 1988 in Warner Brothers, cited in note 3 above, in particular pp. 2622-2624).

(28) - The Court consequently ruled that `Articles 30 and 36 of the EEC Treaty do not prohibit the application of national legislation which gives an author the right to make the hiring-out of video-cassettes subject to his permission, when the video-cassettes in question have already been put into circulation with his consent in another Member State whose legislation enables the author to control the initial sale, without giving him the right to prohibit hiring-out'.

(29) - See G. Marenco-K. Banks, `Intellectual Property and the Community Rules on Free Movement: Discrimination unearthed', in Eur. L. Rev., 1990, p. 224, in particular pp. 248 and 249. The authors are in fact discussing the non-exhaustion of exclusive rental right following initial distribution of the product by sale, but similar considerations apply in the present case.

(30) - See notes 20 and 21 above. See F. Pollaud-Dulian, Le droit de destination: le sort des exemplaires en droit d'auteur, Paris, 1989, p. 464, and Benabou, op. cit. in note 17 above, p. 117, or, for references to the judgment of the Tribunal de Charleroi (Charleroi Court) delivered on 27 March 1986 in joined cases 48.587 and 51.363, GPFI and others v DGD and VRP (Revue internationale du droit d'auteur, 1986, IV, p. 128), according to which `if it is admitted that a film may be the subject of an exclusive territorial licence for distribution in cinemas but that that licence cannot be relied upon in proceedings against third parties in connection with video-cassettes, the exclusive licence for exploitation in cinemas would clearly be rendered worthless because, in that event, the national market would be flooded with video-cassettes which would threaten the exploitation of the film in cinemas, the very thing the exclusive licence was designed to protect'.

(31) - Article 1 of the Directive, entitled `Object of harmonisation' reads as follows:

`1. In accordance with the provisions of this Chapter, Member States shall provide ... a right to authorise or prohibit the rental and lending of originals and copies of copyright works, and other subject matter [i.e. fixations of the artistic work of a performer or phonogram producer and the first fixation of a film] as set out in Article 2(1).

2. For the purposes of this Directive "rental" means making available for use, for a limited period of time and for direct or indirect economic or commercial advantage.


4. The rights referred to in paragraph 1 shall not be exhausted by any sale or other act of distribution of originals and copies of copyright works and other subject matter as set out in Article 2(1).'

Article 2 (`Rightholders and subject matter of rental and lending right'), paragraph 4 provides that: `The rights referred to in paragraph 1 may be transferred, assigned or subject to the granting of contractual licences.'

Lastly, Article 9 (`Distribution right') in Chapter II of the Directive, which is concerned with rights related to copyright, provides that:


2. The distribution right shall not be exhausted within the Community ... except where the first sale in the Community of that object is made by the rightholder or with his consent.

3. The distribution right shall be without prejudice to the specific provisions of Chapter I, in particular Article 1(4).'

(32) - Case C-200/96 Metronome Musik v Music Point Hokamp [1998] ECR I-1953, paragraphs 13-20, and Opinion in that case, delivered by Advocate General Tesauro on 22 January 1998, points 13, 14, 25 and 26.

(33) - See, ex multis, Case 262/81, cited in note 9 above, paragraphs 17 to 20, in which the Court held that, although copyright in a film and the right deriving from it, namely that of exhibiting the film, are not as such subject to the prohibitions contained in Article 85, `the exercise of those rights may, none the less, come within the said prohibitions where there are economic or legal circumstances the effect of which is to restrict film distribution to an appreciable degree or to distort competition on the cinematographic market, regard being had to the specific characteristics of that market'. It is therefore - in the Court's view - for the national court to make such inquiries as may be necessary `and in particular to establish whether or not the exercise of the exclusive right to exhibit a cinematographic film creates barriers which are artificial and unjustifiable in terms of the needs of the cinematographic industry, or the possibility of charging fees which exceed a fair return on investment, of an exclusivity the duration of which is disproportionate to those requirements, and whether or not, from a general point of view, such exercise within a given geographic area is such as to prevent, restrict or distort competition within the common market'. More recently, Advocate General Tesauro observed that, in the light of recent decisions of the Court, there was some doubt as to whether `the grounds of general interest on which the right [i.e. exclusive rental right] was granted were such as to justify an exercise of that right that was clearly contrary to the provisions of Article 86 of the Treaty' (Opinion in Metronome Musik v Music Point Hokamp, cited in note 32 above, point 33).

(34) - The Court has held that those requirements are of particular importance in the field of competition, which is characterised by complex factual and legal situations (see, ex multis, Joined Cases C-320/90, C-321/90 and C-322/90 Telemarsicabruzzo and Others v Circostel and Others [1993] ECR I-393, paragraphs 6 and 7, and Case C-387/93 Banchero [1995] ECR I-4663, paragraphs 18-21).