CJEU rules that warehouse storage of counterfeits due for sale falls within scope of distribution right

Gamla stan in Stockholm,
where the defendant's business was located

Back in October The IPKat reported that in Syed, C-572/17 Advocate General (AG) Campos Sánchez-Bordona had advised the Court of Justice of the European Union (CJEU) to rule that the warehouse storage of copyright-infringing items due to be issued to the public is to be considered as an act falling within the scope of the right of distribution within Article 4 of the InfoSoc Directive.

Personally I thought and wrote that, in light of existing CJEU case law on the right of distribution - notably the decision in Dimensione Direct Sales [Katposts here] -, the AG Opinion was not at all surprising.

Yesterday, after less than 3 months, the CJEU issued its judgment, which endorses the Opinion of AG Campos.

Let's see how the Court reasoned.

Concept of 'distribution'

The CJEU started by noting the the concept of 'distribution' within the InfoSoc Directive:

• Should be given the same meaning as ‘making available to the public … through sale’ within Article 6(1) WCT. 
• Entails (see Dimensione Direct Sales) "a series of acts going, at the very least, from the conclusion of a contract of sale to the performance thereof by delivery to a member of the public. A trader in such circumstances bears responsibility for any act carried out by him or on his behalf giving rise to a distribution to the public in a Member State where the goods distributed are protected by copyright" (emphasis added). The phrase 'at the very least' means that the acts or steps preceding the conclusion of a contract of sale may also fall within the concept of ‘distribution’. It follows that, not just an actual sale, but also an offer to sell which binds its author might be regarded as an act of distribution.     
• Does not require the offer for sale to be actually followed by a transfer of ownership to a purchaser of the protected work or a copy thereof.

All these preliminary remarks served the CJEU to hold that:

Although carrying out the sale is not a necessary element for the purpose of establishing an infringement of the right of distribution, it must nonetheless be proven, to that end, that the goods concerned are actually intended to be distributed to the public without the rightholder’s consent, inter alia by their being offered for sale in a Member State where the work at issue is protected

In a case like the one at issue, that is of someone storing infringing goods and selling identical goods in a shop, what needs to be determined is whether the storage is to be regarded as 'an act prior to a sale'.

The answer is yes, "if it is established that those goods are actually intended to be sold to the public without the rightholder’s authorisation". This might or might not be the case of infringing content held in storage. The right of distribution only goes as far as encompassing the storage of content due for sale.

Not everyone is happy
to be held in storage

When does storage amount to distribution?

In order to help the referring court (Swedish Supreme Court) decide on the background proceedings, the CJEU deemed it helpful to offer some guidance.

"As regards the determination of the purpose of the goods considered, account must be taken of all the factors which may demonstrate that the goods concerned are stored with a view to their being sold, without the rightholder’s consent, on the territory of the Member State where the motifs displayed on the goods are protected by copyright.

Although, among those factors, the distance between the storage facility and the place of sale may constitute evidence that can be used in seeking to establish that the goods concerned are intended to be sold in that place of sale, that evidence cannot, on its own, be decisive. It may, on the other hand, be taken into account in a concrete analysis of all the factors likely to be relevant, such as, for example, the regular restocking of the shop with goods from the storage facilities at issue, accounting elements, the volume of sales and orders as compared with the volume of stored goods, or current contracts of sale."

Comment

As discussed at the time when the Opinion was released, such a broad understanding of the concept of distribution is not surprising, both in light of existing case law and the overall approach to the definition of the scope of InfoSoc economic rights.

In particular, over time the CJEU has stressed the importance of granting a 'high level of protection', this being one of the key objectives underlying adoption of the InfoSoc Directive. Reliance on this has led - as an effect and invariably - to a broad understanding of the scope of copyright protection. The right of distribution is no exception.

[Originally published on The IPKat on 20 December 2018]