ECJ: the storage of goods bearing a copyrighted motif can be an infringement of the exclusive right of distribution

With the judgement of 19 December, the European Court of Justice (case C-572/17) ruled on the interpretation of Article 4 paragraph 1 of Directive 2001/29/EC which, as known, provides authors the exclusive right to authorise or prohibit any form of distribution to the public of the original or copies of their works.

The judgement follows the request for a preliminary ruling that has been made in criminal proceedings brought by the Swedish Prosecutor-General against Mr Imran Syed concerning the infringement of trademarks and copyright in literary and artistic works according to the national Swedish law implementing Directive 2001/29. In particular, Paragraph 53 of that Law punishes “any person who, intentionally or through gross negligence, takes measures relating to a literary or artistic work which constitute an infringement of the copyright in that work”. The law specifies that such a measure may consist of making the work available to the public without the right holder’s consent and, so for example offer for sale, rent or loan, or distribute to the public, copies of the work.

In the case at issue, Mr Syed ran a retail shop in which he sold clothes and accessories with rock music motifs in Stockholm. Goods that supplied the shop came from two storage facilities, one adjacent to the shop and another located in a suburb of Stockholm.

Having determined that the sale of several of those items infringed trademarks and the claimants’ copyright, the District Court found Mr Syed guilty of trademark infringement concerning all the goods discovered and of infringement of copyright concerning all the goods in the shop and the ones, identical to the first, stored in the storage facilities. Regarding the other goods in the storage facilities, the Court held that they could not be regarded as having been “offered for sale” according to Swedish law. Hearing the case on appeal, the Stockholm Court of Appeal, reduced the sentence given to Mr Syed, finding that the infringement of copyright had been committed only with respect to the goods located in the shop. In fact, that court took the view that Mr Syed had stored those goods for the purpose of sale, however, it could not be considered that they “had been offered for sale” or “distributed to the public”.

Before the Supreme Court, the Prosecutor-General claimed that Mr Syed should be found guilty in respect of all the goods, including the ones stored in the storage facilities. Mr Syed argued that such an infringement requires acts directed towards the public with the aim of transferring each specific item; circumstances that, in the case of purchase and storage of goods, cannot be considered existent. The Prosecutor General noticed that the Directive and the national implementing Law did not expressly prohibit the storage of goods bearing a copyrighted motif for the purpose of sale and decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:

• If there is an infringement of the author’s exclusive right of distribution as regards goods stored in a storage facility, bearing a motif protected by copyright on the territory of the Member State where the goods are stored, identical to those illegally offered for sale in a shop;

• if it is relevant that the goods are held in a storage facility adjacent to the shop.

First of all, the ECJ ruled that the notion of “distribution to the public…by sale” ex Article 4 paragraph 1 of the Directive must be interpreted in a manner that is consistent with international law and, in particular, according to “making available to the public…through sale” ex Article 6 paragraph 1 of the CT (WIPO Copyright Treaty). Taking that context into account, the Court has found that, in general, distribution to the public is characterised by a series of acts going from the conclusion of a contract of sale to the performance thereof by delivery to a member of the public, not excluding that it can also include additional acts. The ECJ ruled that an act prior to the sale may also infringe the distribution right as long as it is proven that the goods were actually intended to be distributed to the public in a Member State where the work at issue is protected, without the right holder’s consent.

In light of the above, it must be established whether storage facilities, like the one under examination, can be considered an act prior to a sale that is liable to infringe the right holder’s distribution right. In this respect, the ECJ noticed that the fact that the stored goods and the goods sold in the person’s shop are identical constitutes evidence that the goods concerned are stored with a view to their being sold.  In fact, all or part of the goods stored may be sold on the territory of a Member State different than the one in which the motif displayed on the goods is protected.

Referring back to the national court the decision on the purpose of the stored goods identical to those sold in the shop, the ECJ considered that account must be taken of different factors. In this regard, the ECJ specified that “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”.

In the light of all the foregoing considerations, the ECJ concluded that “Article 4(1) of Directive 2001/29 must be interpreted as meaning that the storage by a retailer of goods bearing a motif protected by copyright on the territory of the Member State where the goods are stored may constitute an infringement of the exclusive distribution right, as defined by that provision, when that retailer offers for sale, without the authorisation of the copyright holder, goods identical to those which he is storing, provided that the stored goods are actually intended for sale on the territory of the Member State in which that motif is protected. The distance between the place of storage and the place of sale cannot, on its own, be a decisive element in determining whether the stored goods are intended for sale on the territory of that Member State”.