ICOPYRIGHT INTERMEDIATION: THE RECENT JUDGEMENT OF THE EUROPEAN UNION COURT OF JUSTICE ON THE ACCESS OF INDEPENDENT MANAGEMENT ENTITIES TO THE ITALIAN MARKET.

The Court of Justice, with judgement of 21 March 2024 on Case no. C-10/22, addressed, upon a preliminary reference from the Italian Court, the compatibility of the Italian copyright legislation with Directive 2014/26.

Such Directive, concerning collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market, must be read in light of the Italian Copyright Law no. 633/1941. According to the Directive, a collective management organisation is an organisation which is authorised by law or by way of assignment, licence or any other contractual arrangement to manage copyright or related rights on behalf of several right-holders, for the collective benefit of those right-holders, as its sole or main purpose, and which is owned or controlled by its members or is organised on a non-profit basis. An independent management entity, on the other hand, is an organisation, authorised in the same way, which is neither owned nor controlled, directly or indirectly, in whole or in part, by right-holders and which is organised on a for-profit basis. Italy has transposed the aforementioned Directive by Legislative Decree no. 35/2017, which provides for the freedom of the right-holders to entrust the management of their rights to a collective management organisation or an independent management entity, regardless of the Member State of nationality, residence or establishment of the organisation, entity or right-holder. However, as clarified in Article 4 of said law, what is provided in Article 180 of the Copyright Law with regard to copyright management activities remains unaffected. In fact, such activity, regardless of the form and manner in which it is carried out, is exclusively reserved to the Italian Society of Authors and Publishers (SIAE), and to other collective management organisations as provided for by Legislative Decree No. 35 of 15 March 2017.

The case in question arose from a dispute between an Italian collective management organisation and a Luxembourg-based company that had been operating independently in Italy since 2004. The Italian organisation had filed a claim before the Rome Court, seeking the cessation of the counterparty’s activity, in view of the restrictions imposed by Italian law on the exercise of copyright management activities by independent management entities. The defendant argued that Directive 2014/26 had been incorrectly transposed into Italian law, in particular to the extent that it reserved rights management activities exclusively to collective management organisations. The Italian judge, noting the limitation in Article 180 of the Copyright Law, as claimed by the plaintiff, suspended the judgement in order to request a preliminary ruling from the Court of Justice of the European Union. The preliminary reference concerned the interpretation of Directive 2014/26, as to whether or not it precludes national legislation which reserves access to the copyright management market only to collective management organisations, thereby excluding independent management entities.

The Court ruled out deciding the preliminary reference on the part of the question concerning independent management companies established in the Member State, considering it hypothetical and irrelevant to the dispute. The Court also broadened the scope of the question to include not only the interpretation of Directive 2014/26, but all the relevant legislation. Given the inapplicability of Directive 2000/31 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market and Directive 2006/123 on services in the Internal Market, the Court held that the activity of managing copyright was not covered by a sufficiently exhaustive harmonisation in European Union law. Therefore, it is necessary to analyse how national law complies with Treaty rules. The Court held that Article 56 of the Treaty on the Functioning of the European Union precludes national measures which prohibit, restrict, or make less attractive the exercise of the freedom to provide services, such as the provision of Italian law which does not allow the exercise of management activity by independent management entities established in another Member State. Such a restriction on the freedom to provide services is acceptable in order to balance overriding reasons of public interest, provided it is genuinely appropriate to guarantee that public interest. The judgment emphasises that, since the European legislation itself provides for different obligations, a certain difference in treatment between independent management entities and collective management organisations is consistent with the Directive. However, the exclusion of independent collective management organisations from the activity of copyright management is a restriction that goes beyond what is necessary in terms of the scope of the guarantee of copyright protection.

The Court therefore declared the Italian legislation incompatible with European Union law, as it prevents independent management companies from exercising a fundamental freedom, without balancing this restriction with the requirements of copyright protection.

Given the direct effect of the Court's rulings, the judgment has a decisive impact on the market of management services. The court provided an interpretation of Article 56 TFEU and Directive 2014/26 that opposes national legislation that generally excludes independent management companies from providing services, such as the Italian law. This ruling liberalizes a sector which, until now, was heavily restricted in favour of collective management organisations. Following the Court's intervention, foreign companies operating in the copyright management sector on a profit-making basis can operate on the Italian market as long as they comply with the requirements laid down by the law. On the other hand, right-holders will have more freedom to choose the organisation to which they entrust their rights, thus benefiting from a more competitive market.

Author: Avv. Daniela di Palma and Dott.ssa Dafne Tomasetto