SOKOJ wins court battle against “Exit”

This year’s Exit festival, a major event on Europe’s musical scene, which traditionally takes place in Novi Sad (Serbia), ended on 14 July. It is worth taking a look into legal squabbles the festival has lately had with the Serbian collecting societies. It turns out that at least one such dispute ended recently, and that Exit’s opponent in the court had the upper hand.

In the case, SOKOJ, which manages the rights of composers, songwriters, arrangers and other rights’ holders in respect of musical works, sued the “Exit” association (the festival organizer) for the failure to pay royalties for the public performance of the music at the 2010 edition of the festival. “Exit” and SOKOJ had entered into an agreement in 2007, whereby SOKOJ authorized “Exit” to publicly perform musical works from its repertoire. “Exit” agreed to pay, in line with SOKOJ’s general Tariff, 3 percent of the profit from the sale of tickets if more than 30,000 tickets are sold – as indeed they were at the 2010 edition of the festival. “Exit” subsequently paid a portion (around 5,000 EUR) of the total sum (around 50,000 EUR) requested by SOKOJ, but refused to pay the rest.

In an earlier similar case, described on this blog, “Exit” successfully defended against the Organization of Phonogram Producers of Serbia (O.F.P.S.). The Commercial Appellate Court ruled in that case that the plaintiff , O.F.P.S., did not show that by the period covered by the complaint (2007 and 2008) it had concluded agreements with relevant foreign collecting societies to lawfully act on behalf of the foreign producers of phonograms and collect royalties for them.

In the dispute with SOKOJ, “Exit” tried a similar argument: the plaintiff, according to “Exit”, did not prove that it was authorized to claim legal protection on behalf of the foreign authors. The argument proposed by “Exit” failed twice: before the Commercial Court in Novi Sad (case no. P 859/2011, judgment of 22 February 2012) and, subsequently, before the Serbian Commercial Appellate Court (case no. Pž 4658/12, judgment of 3 April 2013).

A major difference between this case and the previous one (with O.F.P.S. as the plaintiff) concerns the existence and legal import of bilateral agreements between the Serbian collecting society, on the one hand, and foreign collecting societies, on the other. In the O.F.P.S. case, the Commercial Appellate Court took issue with the first-instance court’s failure to establish which phonograms were used at the Exit festivals in 2007 and 2008, whether those were domestic or foreign phonograms, and whether O.F.P.S. had concluded bilateral agreements with foreign counterparts authorizing O.F.P.S. to claim legal protection on behalf of the foreign rights’ holders.

In the SOKOJ case, in contrast, the first-instance court established that by July 2010, when the Exit festival giving rise to the litigation took place, SOKOJ had entered into 102 bilateral agreements with foreign collecting societies representing authors of musical works.

More important, however, is the fact that the Serbian Intellectual Property Bureau – which issues general authorizations for Serbian collecting societies to operate – had renewed SOKOJ’s authorization prior to the 2010 festival; in contrast, the authorization the IP Bureau had granted to O.F.P.S. prior to the festivals from 2007 and 2008 was issued for the first time. The difference between issuing and renewing an authorization, as it turns out, is critical.

As the Commercial Appellate Court emphasized in the judgment of 2 April 2013, Article 180 of the Serbian Copyright Act contains legal assumption that a collecting society is authorized to act on behalf of all holders of copyright and/or related rights in the relevant field. Although Article 180 of the law does not state it explicitly, the assumption applies vis-à-vis foreign rights’ holders only after a renewal of the initial authorization to the collecting society, and the Court has ruled accordingly in similar previous cases.

In practical terms, this means that a physical person or legal entity which communicates foreign music to the public and claims not to owe any royalties to SOKOJ has the burden of proving that SOKOJ has not entered into an agreement with the foreign collecting society representing the work’s author.The other collecting society, the O.F.P.S., did not benefit from the assumption of the existence of such agreements during the 2007 and 2008 editions of the Exit festival, and that is why the burden of proof (that agreements had been concluded) was on O.F.P.S., not on “Exit”.

Both O.F.P.S. and SOKOJ have by now received renewal of authorizations from the Serbian IP Bureau, so the alleged infringers who used the musical works and phonograms after the dates of the renewals of authorizations would have the burden of proof that the respective collecting society does not have a bilateral agreement with the foreign collecting society.