The Court of Milan rules on fair compensation for the exploitation of films

In a judgment published on 1 April, the Business Court of Milan (Judges Ms Tavassi, Ms Giani and Ms Gandolfi) ruled on the fair compensation of the author of a film who assigned the relevant broadcasting rights to the producer of the same work . The dispute was brought against the Italian collecting society SIAE by the famous broadcaster Sky, who asked the court to ascertain and declare that the fair compensation at issue, provided by art. 46bis of Italian Law no. 633 /41 (Italian Copyright Law, “ICL” ), was not the responsibility of the broadcaster but should be provided to the authors by the producer of the work itself.

In fact, the provision in dispute, introduced into the ICL by Legislative Decree no. 581/96 , initially provided that fair compensation for the use of films should be given to the authors by the producers of the same films. However, Legislative Decree 154/97 amended this by placing the responsibility of fair compensation on the broadcasters. Notwithstanding this, in the judgment concerned, the plaintiff claimed that the provision should be interpreted in the sense that the fair compensation should be paid by the producer; failing to do so, according to the plaintiff, would result in the provision being unconstitutional and incompatible with EU law. The plaintiff therefore asked the court to ascertain that the provision shall be interpreted as envisaged by it, or alternatively, to bring the issue in front of the Italian Constitutional Court and the EU Court of Justice.

In the decision under review, the court carried out a detailed survey of the applicable law and entirely rejected the plaintiff’s claims, concluding that the provision should be interpreted exactly in accordance with its literal text, which places the responsibility of fair compensation on the broadcasters. In particular, in specifically rejecting the different defences brought by Sky, the court found that:

i) “the will of the legislator to place the responsibility for fair compensation on broadcasters rather than producers is clearly evincible by the text of the provision and is expressly stated in the relevant preparatory works“;

ii) there was no misuse of power by the legislator in going forward with the change in question, as it had the power to do so;

iii) similarly, there was no misuse of power even with regard to the alleged violation of the principles and criteria set out in the enabling law: the latter, in fact, “did not identify the person burdened by the obligation to pay the fair compensation“, therefore the legislator “had the discretion to identify the person liable for the payment of fair compensation in favour of the authors, provided that the compensation was linked to the use of the works“;

iv) it is irrelevant that the broadcaster does not have a contractual relationship with the author of the works and only with the producer; the legislator, in fact , in the exercise of its discretional power, simply decided to “establish fair compensation in the law instead of within the contractual relationship”, such that failure to pay the same “amounts to a breach of the law and not to a breach of contract“. A similar mechanism, the court notes, is also provided in other cases by other provisions of the ICL;

v) there is no contrast between art. 46bis ICL and art. 56 of the Treaty on the Functioning of the European Union (“TFEU”), which prohibits restrictions on the free movement of services within the EU and which, according to the plaintiff, would have been breached by the provision in question because it would make it more expensive – and therefore limit – television broadcasting in Italy. Even if the plaintiff’s statement on the limitative effect of the provision was correct, it would have to be considered that art. 56 TFEU only prohibits “unjustified” restrictions, whilst art. 36 TFEU expressly allows restrictions on grounds of the protection of intellectual property such as the one in question;

vi) finally, there is no contrast between the provision in question and Directives 93/83/EC and 2001/29/EC, which define, respectively, the exclusive right to satellite broadcasting and the exclusive right of communication to the public. On the one hand, in fact, the two directives “do not prohibit the provision of the right to compensation“, and on the other hand, the provision of the latter “does not affect the recognition of the exclusive right of communication to the public by the producer“.

In light of all the foregoing, the court therefore finds that fair compensation is the responsibility of the broadcasters and not the producers. As for the amount, pursuant to art. 46bis (4), it will have to be determined on the basis of individual or collective agreements, or, failing that, by a panel of three arbitrators who will decide according to equity.