“Exit” Festival and Foreign Producers of Phonograms: New Challenge for O.F.P.S.

The previous post described how the Serbian Commercial Appellate Court denied, in May of this year, a request by the Organization of Phonogram Producers of Serbia (O.F.P.S.) to collect royalties for communication to the public of Italian sound recordings in a Belgrade restaurant. A few months later, as it turns out, the same court issued a decision in an ongoing case that might again be the cause of a headache to the collecting society. Much larger financial stakes are involved this time, because the party opposing O.F.P.S. is “Exit” Serbia. The association has been organizing an annual music festival in Novi Sad since 2000, which attracts tens of thousands of fans of contemporary music from all parts of Europe. O.F.P.S. claims that “Exit” owes it almost 350,000 Euros of unpaid royalties for the use of Serbian and foreign phonograms during the festivals held in 2007 and 2008.

In March 2001, the Commercial Court in Novi Sad granted one half of the requested sum to O.F.P.S., but on 20 September 2012 the Commercial Appellate Court annulled the verdict and ordered a retrial. Similar to the case analyzed in the previous post, the Commercial Appellate Court demanded that O.F.P.S. should prove it had standing to sue – or otherwise they would lose the case.

The list of celebrities who have played at the “Exit” festival includes Pet Shop Boys, Morrissey, Billy Idol, The Cult, Guns N’ Roses, Franz Ferdinand, Stereo MC’s, Iggy Pop, Massive Attack, Beastie Boys, Snoop Dogg, The Prodigy, Moby, Patti Smith, Chemical Brothers, and numerous others. The Petrovaradin fortress, at which the festival is held, only adds to the appeal. Little wonder then that huge crowds gather every summer to enjoy the music, the sights, and the company of fans with whom they feel culturally close.

O.F.P.S. sought to collect royalties from “Exit” for the use of recorded music before concerts, during breaks, and after concerts, as well as royalties for the use of recorded music played (communicated to the public) at the various stages independent of any concerts. For O.F.P.S. to lawfully act on behalf of the foreign producers of phonograms and collect royalties for them, it has to prove that in the relevant period (2007 and 2008) it had concluded appropriate agreements with the relevant foreign collecting societies.

The court of Novi Sad inferred the existence of such agreements from the grant on 12 April 2005 of a general authorization for O.F.P.S. to operate. The Serbian Intellectual Property Bureau (IP Bureau), which issued the authorization, referred, in the April 2005 decision, to a report submitted by the O.F.P.S. as part of the application, listing bilateral agreements which the organization had concluded up to that date. As the court in Novi Sad read it, with the decision in April 2005 the IP Bureau renewed the authorization to O.F.P.S. first granted in 2002.

The Commercial Appellate Court differently interpreted the general authorization granted by the IP Bureau in April 2005. The appellate body concluded that in 2005 O.F.P.S. applied for issuance – afresh – of a general authorization, rather than for a renewal of the earlier authorization.

Here, the wording of the Commercial Appellate Court’s decision becomes fuzzy (as, unfortunately, it often is in decisions issued by courts in Serbia), but a plausible reading of what the court says is that any prior agreements between O.F.P.S. and foreign collecting societies cannot be deemed to have carried into the new authorization granted by the IP Bureau. In the court’s words:

The fact that after the first authorization from 2002, another authorization was issued does not mean that what occurred was a renewal in relation to which the fulfillment of the condition concerning agreements with foreign organizations is to be assessed. Therefore, with respect to the period of validity of the first authorization the plaintiff has to prove that it has standing to sue for compensation for the use of phonograms the rights of which are held by foreign persons, because the statutory presumption [that an organization for the collective management of copyright or related rights is authorized to act on behalf of the rights’ holders] does not apply vis-à-vis foreign rights’ holders.

What is not in doubt is that the Commercial Appellate Court does not consider it proved that O.F.P.S. was authorized in 2007 and 2008 to collect royalties on behalf of foreign producers of phonograms. The renewal of O.F.P.S.’ general authorization to operate, from April 2005, is not proof. In a closing paragraph, the court instructed the Commercial Court in Novi Sad to establish in the retrial which phonograms were used at the “Exit” festivals in 2007 and 2008, whether those were domestic or foreign phonograms, and whether the plaintiff was authorized to claim legal protection on behalf of the foreign rights’ holders.

It remains to be seen whether O.F.P.S. will be able to provide the requested agreements with the relevant foreign collecting societies as evidence. If that proves impossible, O.F.P.S. will be left only with the statutory presumption of the authorization to act on behalf of Serbian producers of phonograms. Here, O.F.P.S. may run into another difficulty. The first-instance court said in the quashed judgment that “drawing an expert report on the share of the use of phonograms in comparison to the rest of the festival program would be almost impossible, i.e. unreasonably burdensome, having in mind that the festivals in 2007 and 2008 lasted four days each, with tens of thousands of different songs performed at different stages”. The task of establishing which portion of the phonograms communicated to the public in 2007 and 2008 was produced domestically would be, if anything, even more daunting.