Phonograms: when the right to fair compensation accrues

Court of Rome – Decision No. 12101/2023 – Publication on August, 4 2023

Decision on the qualification of the phonogram producer and fair compensation.

The litigation before the Italian Courts deals with the qualification of the phonogram producer and the consequent entitlement to fair compensation in the context of a commission agreement for the production of musical works.

The decision is related to the rights accrued on the phonogram only. The authorial aspects on the musical works are excluded in this case law.

The Court of Rome held that, for the right to accrue, it is required:

1) a titular subject;

2) a phonogram

One of the first aspects to be clarified is to establish who may be the phonogram producer from a subjective point of view. According to Italian law, the qualification of phonographic producer belongs to whoever has taken the initiative and responsibility for the first fixation of sounds on a phonographic support (master), independently of the fact that this subject holds the qualification of entrepreneur.

The Judge clarified that, although in most cases the phonogram producer carries out this activity on a continuous and professional basis for profit, the Italian copyright law considers “phonogram producer” any natural or legal person who takes the initiative and responsibility for the first fixation of sounds. The amount of the economic investment for the first fixation is not relevant. Indeed, Italian law does not require any condition nor does it set any limit on the minimum amount of the economic investment.

In summary: a phonogram producer may also be a natural person who is not an entrepreneur and who first made the master, irrespective of whether the fixation took place in the context of a commercial activity aimed at marketing the copies. Even modest investments may be sufficient to realize the first fixation of sounds on a phonographic support able to be used by third parties for profit or non-profit purposes.

After clarifying the nature of the phonographic producer and the consequent entitlement to receive fair compensation for all the uses made of the phonograms, the judgment focused the issue on the work’s commission and on the transfer of (author’s and related) rights.

Granitic is the principle that the commissioning of musical works would in any case be different and would not involve the separate commissioning of the first fixation of sounds on a phonographic support. The two activities are completely different and do not overlap.

Therefore, the assignment to the publisher of the rights of use of the musical work due to its author and the delivery to the publisher of the phonogram support by the author does not include the simultaneous assignment of the rights due to the phonogram producer. These rights may constitute the subject matter of an ordinary property right completely independent of the rights of economic use.

The two tasks (realization of musical works and fixation of sounds) are then different. The possible material handing over of the master remains irrelevant.

The physical hand-over of the master does not play any role and therefore does not imply the automatic transfer of the single rights as, for instance, happens in the case of the transfer of a film negative for analogue photographs or a mold to reproduce a work. An express written agreement is then necessary in order to prove the transfer of individual rights.

Moreover, the Italian Copyright Law does not require the prior publication and commercialization of the copies (primary uses) for the purposes of the accrual of the right to fair compensation. Therefore, the compensation is also granted in the case of secondary uses only, which means that it is sufficient that the phonogram is used even without a profit purposes. In this context, the fact that the Rome Convention, the WIPO Treaty and the European Directives have recognized a right to remuneration only for phonograms published for commercial purposes is irrelevant. The regulations adopted in supranational fora provide a basis for minimum harmonization, but this leaves the Member States free to introduce higher levels of protection, as was the case with the Italian regulation, which therefore dictates a more restrictive provision on the scope of application of the rights of phonographic producers or performers.