SIA AKKA/LAA (SIA “Autortiesību un komunicēšanās konsultāciju aģentūra/Latvijas Autoru apvienība” –Copyright and Communication Consulting Agency ltd./Latvian Authors Association) is a non-profit organisation founded in Riga by a separate non-profit organisation, the Latvian Authors Association, whose members are various Latvian artists.
At the end of the 1990s this organisation, acting as a representative of approximately 2000 domestic and two million international authors who had entrusted it to manage the copyright of their musical works, was concluding licence agreements with several broadcasters in Latvia.
From 1998 to 1999, after the expiry of the previous licence agreements, this organisation and certain broadcasting organisations in Latvia could not reach an agreement on the terms of the future licence agreements, especially with regard to the remuneration to be paid for the broadcasting of music. As a result some broadcasting organisations continued to use the protected musical works without a written agreement, either without paying any remuneration or paying the amount the broadcasting organisations unilaterally considered equitable. In 2002 this organisation instituted civil proceedings against several broadcasters operating in Latvia.
In their claim against Latvijas Radio, a state-owned limited liability company, the SIA AKKA/LAA asked the Riga Regional Court, acting as a first-instance court, to find that by broadcasting the rightsholders’ musical works without a valid licence agreement between 1 January 2000 and 31 December 2001, the defendant had violated economic interests of the authors represented by the CMO.
The CMO further asked that the court award compensation for unauthorised use of musical works. By relying on the authors’ exclusive rights to control the use of their musical works, the CMO asked the court to apply an injunction precluding the defendant from using the authors’ works before a valid licence agreement between the parties had come into effect. By lodging a counterclaim the defendant in essence asked the court to recognise that in the disputed period the parties had a de facto contractual relationship.
On 2 April 2003 the Riga Regional Court dismissed the CMO’s claim and upheld the counterclaim. The court established that even though the licence agreement concluded between the parties with the royalty rate set at 3.2% of the defendant’s annual income had expired in 1999, the CMO had continued receiving royalty payments from the defendant, which continued to pay at a lower rate. Given that the CMO had not referred to objections to the broadcasting of the musical works, the existence of a de facto contractual relationship between the parties had been proven. Relying on section 41 of the Copyright Law the court set the royalty rate from 2000 to 2001 at 1.57% of the defendant’s annual income.
On 26 November 2003 the Civil Cases Chamber of the Supreme Court, acting as an appellate court, diverted from the first-instance court’s findings and recognised that the defendant had infringed copyright by broadcasting the musical works over a prolonged period of time without a valid written licence agreement. It awarded the applicant organisation compensation in the amount of LVL 100,000 (EUR 143,000), which exceeded the amount the defendant had paid under the expired licence agreement. It considered that it would be fruitless to issue an injunction prohibiting the defendant from broadcasting the works.
The appellate court observed that in principle the parties had expressed their interest in concluding a licence agreement but that before and during the court proceedings the parties had not agreed on the equitable royalty rate. It also pointed to the CMO’s responsibility in failing to reach an agreement in the negotiation of a new licence. As a result, over a prolonged period of time the authors’ rights had been unprotected.
As the parties had not asked the court to decide on the exact terms and conditions of a licence agreement, the appellate court decided to impose on the parties a general obligation to conclude a licence agreement by 1 March 2004. Given that the parties had been unable to agree on a royalty rate, the appellate court set the rate at 3% of the defendant’s net turnover. In reaching this conclusion the appellate court took into consideration such elements as, inter alia, the royalty rate set in other court proceedings and the existing practice in certain other EU member States.
The CMO appealed on points of law arguing that by, inter alia, ordering the parties to conclude a licence agreement and setting its terms, the court had overstepped its powers and acted in breach of section 11bis of the Berne Convention and section 15 of the Copyright Law. On 17 March 2004 the Senate partly upheld the lower court’s judgment with similar reasoning as in the first set of proceedings.