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Fair competition or own goal?

17 March 08

IP rights owners are anxiously watching the progress of litigation over the screening of football matches in pubs

by Robert Buchan

Given the UK’s affection for “the beautiful game” and the fact it is a highly lucrative market, it is not surprising that considerable media interest surrounded the recent English High Court case The Football Association Premier League Ltd v QC Leisure and others. No doubt much of the interest was generated by fear that pubs may not be able to show certain matches! However the case does also raise interesting IP issues, and in particular highlights the increasing potential impact competition law can have on IP enforcement.

QC were alleged to have supplied or used non-UK decoder cards, which allowed the satellite broadcast of live English Premiership football matches in pubs in the UK at a greatly reduced cost compared with services obtained through FAPL’s UK licensees. FAPL claimed copyright infringement and sued QC as importers, suppliers and/or users of the cards. QC raised various competition law defences, including that the supply of cards for UK use from elsewhere in the EU was allowed under article 81 of the EU Treaty, which permits free movement of goods in the EU. They also argued that the FAPL EU licence terms were contrary to article 81, as they prohibited foreign broadcasters from supplying cards into the UK, which was a concerted practice with the object or effect of limiting or controlling the market within the EU.

FAPL applied for summary judgment on the grounds that the defences had no reasonable prospect of succeeding. The High Court did not agree and allowed the case to go to trial.

Exclusive – to a degree

The nub of the legal dispute was whether FAPL could enforce their licence terms, to protect their copyright in the broadcasts, or whether QC did have a reasonable defence which they should be allowed to take to a full trial. It is fair to say that until relatively recently, broadly speaking UK courts were fairly sceptical and dismissive of such defences and tended to grant summary judgments in IP cases. However this case demonstrates that the issue and interaction of these two legal areas is not always clear cut, and so IP owners may increasingly require to consider the potential impact of such defences as part of their enforcement strategies.

The licence provisions stated that the foreign licensees/broadcasters were obliged to prevent use of the non-UK decoder cards in the UK or outside their licensed territory, i.e. they were prohibited from supplying non-UK cards for users in the UK, and none of their customers were allowed to receive broadcasts from within the UK. The court drew a distinction between “open” exclusive licences, where the licensor is prevented from licensing itself or others to exploit the subject matter in the territory, and “closed” licences, where absolute territorial protection is intended to be achieved by the exclusion of parallel imports.

In previous cases in the European Court of Justice it had been decided, albeit some 25 years ago, that open licences are a legitimate means of partitioning the EC market, and so it was legitimate to carve up rights on an exclusive territorial basis. However QC argued that closed licences breached article 81 because they prevented broadcasters responding to “passive orders” received from outside their licensed territories. They argued further that they prevented parallel traders from supplying parallel imports of decoder cards. The court expressed reservations that the provisions here went beyond granting just territorial exclusivity but placed an obligation on the licensee to police and enforce that, which might fall foul of competition law.

Extra time

The court decided that these issues should go to trial and refused to grant summary judgment. QC have indicated that their intention is to refer the EC law questions to the ECJ on the facts, and so the case may well run on for many years. Interestingly, it may be of little comfort for IP owners to know that the EC Commission in this case had seen the relevant provisions and had raised no objection to them. The court considered that short of a full Commission investigation into the agreements, and specifically the clauses in question, there was no help to be gleaned here for FAPL. Meantime it remains unclear whether or not such contractual provisions are legitimate.

Whilst we all continue to watch the matches in the comfort of a welcoming watering hole, many IP owners will await the result of this ongoing saga to see which party’s arguments ultimately score the goals that count.

Robert Buchan, Maclay Murray & Spens