Metronome Musik is a German company which produced the compact disc "Planet Punk". Music Point Hokamp, which runs a compact disc rental business, offered copies of the abovementioned CD for rental.

The Community Directive at issue requires the Member States to provide a right to authorise or prohibit the rental of copyright works.

In Germany, the Law implementing that Directive requires the consent of the rightholders (in this case of the producer of the CD) for the rental of protected works.

On the basis of that provision, Metronome Musik sought an injunction from the Landgericht Köln (Regional Court, Cologne) restraining Music Point Hokamp from renting out the compact disc.

Music Point challenged the constitutional and Community basis of the rules which, inter alia, grant the producers of sound recordings the exclusive right to authorise or prohibit the rental of protected works, alleging that that provision affects the exercise of a business activity hitherto pursued without restriction (the rental of CDs). Moreover, in its view those rules are contrary to the general principle that the sale by the rightholder of the protected work results in the exhaustion of distribution rights.

In its judgment, the Court of Justice refers, first, to the distinction between the various forms of commercial exploitation, such as rental or lending, of a literary or artistic work. If the collection of royalties were authorised only on sales, it would not be possible to guarantee authors and makers of films a remuneration which reflects the number of occasions on which hiring out actually takes place and enables them to amortise the especially high and risky investments required for the creation of new works. Laws which provide specific protection of the right to hire out video-cassettes are therefore clearly justified on grounds of the protection of industrial and commercial property.

Thus, the distinction in the Directive between the specific rental and lending right and the distribution right (mainly distribution by sale) is justified. The introduction of an exclusive rental right does not therefore constitute any breach of the principle of exhaustion of the distribution right, the purpose and scope of which are different.

Moreover, although the freedom to pursue a trade or profession forms part of the general principles of Community law, that principle is not absolute and consequently may be restricted, provided that any restrictions in fact correspond to objectives of general interest and are not disproportionate or intolerable.

Since the Directive reflects the concern to eliminate differences between national laws which are liable to create barriers to trade and to guarantee that authors and producers of artistic works can receive appropriate income, having regard in particular to the increasing threat of piracy, it is in conformity with the objectives of general interest pursued by the Community.

Moreover, the introduction of an exclusive rental right is in conformity with international conventions and more particularly those concluded in the framework of the World Trade Organisation.

Furthermore, the consequences of introducing such a right cannot be regarded as disproportionate or intolerable since the Directive does not have the effect of eliminating any possibility of rental. Those engaged in the business of hiring out can negotiate with rightholders in order to obtain an authorisation or a contractual licence.

Solely for media use - Unofficial document not binding on the Court of Justice Available in English, French and German.

For the full text, please consult our internet page http://curia.eu.int around 3 p.m. today.

For more detailed information, please contact Tom Kennedy - Telephone 00352 4303 3355, Fax 00352 4303 2500.