Chillin'Competition

It has just been announced that Paramount Pictures has offered commitments to address the Commission’s concerns in the context of the high-profile Pay-TV investigation (in which, for full disclosure, I represent a third party, PACT -British Independent Producers-). Pablo has also in the past commented on this case in some detail (see here and here).

This looks like surprising news, as until now Paramount, like every other affected party, strongly disputed the Commission’s allegations. As you may remember, the allegations in this pilot case (with potential huge ramifications) relate to clauses present in bilateral agreements between Hollywood majors and Sky pursuant to which Sky must ensure that content is not broadcast outside of the territory covered by its license. The case relates both to satellite transmission and to online transmission, even if the two are subject to different copyright regimes (more on this in a second).

This is being portrayed as big news in the press, but is it really that relevant? Let’s see:

-For Paramount: I can’t judge on whether yielding makes business sense for Paramount. Surely they have their reasons (which are seemingly financial rather than legal). They are paying a price but they’re the only one who can judge whether the compensation is worthy from a business standpoint. Thus, logically, no comments on our part.

-For other companies: If this were a standard poker game appearances could suggest that Paramount is folding in the light of a strong hand on the part of the Commission. I doubt this is the case given the specificities of Paramount’s situation, but arguably that’s only an outsider’s impression. The only objective, legally relevant fact is that commitments do not imply the admission of an infringement, so the debate remains entirely open and this does not legally place others in a worse position.

Much to the contrary, it could even be argued that once the Commission has accepted commitments with regard to one undertaking, it could now not impose fines on others for exactly the same practices.  This is because, as you know, commitments are only appropriate in cases where the Commission does not intend to impose fines. In fact, unless I’m mistaken there has never been a case or cases involving the same practices where the Commission accepted commitments and imposed fines. Last time a “hybrid” comparable scenario arose (in the Samsung and Motorola cases; see here for my comment on this point), the Commission decided not to impose fines on Motorola but rather to limit itself to declaring an infringement.

 -For the Commission: For the Commission this means good press (it did get something out of the case), a bit less work (but not that much less since most of the work was done). As explained, it also arguably could mean that perhaps it cannot now impose fines on others. At the same time, it could also be argued that this move would somehow set the Commission on a pre-judged inevitable path (as it would appear odd that charges were withdrawn with regard to others after one has yielded), but in my personal view that would be a great mistake, as cases are not to be decided on the basis of a company’s strategy, but rather on the merits, and the Commission should continue examining the feedback it received in the replies to the SO and at the hearing, as I’m sure it is doing.

But forget about PR, and about winning or losing a specific case; is this offer something that changes anything in the marketplace or that achieves the Commission’s wider objectives? I’m not so sure.

Even if every major studio (or even every copyright holder in the world) were to offer similar concessions -which imply renouncing to given clauses that enforce their IPRs in a given way- the copyright legislation would still be in place (unless changed by the legislature, which is unlikely). This means that even if all geo-blocking clauses were suppressed, the “passive sales” that the Commission would like to see would not exist, because they would still be precluded by the regulatory framework (which in the online world grants copyright holders the right to authorize or prohibit communications to the public in every territory of broadcast; see Art. 3.3 of the Copyright Directive). I already hinted at this here.

That is why, at least in my view, the only concessions with which the Commission could achieve something meaningful in this case would be those of Member States in the context of the legislative process.