GEMA Pro Procedure

GEMA exercises the copyright powers of its members in the field of musical performance rights and mechanical reproduction rights. The income generated from the exploitation of copyright is distributed to the members. The Federal Court of Justice (BGH) had to decide in this landmark decision of 2005 whether the distribution basis could be unilaterally changed by GEMA.

The plaintiff, a guitarist and composer of entertainment music, objected to the PRO procedure introduced by GEMA with effect from 1 January 1998. In contrast to the previously used linear extrapolation procedure, which valued submitted performances sevenfold, the PRO procedure was intended to achieve a more accurate result by additionally taking into account the distribution of performance venues across GEMA's administrative districts and the distribution of performance times across calendar months. Through the linear calculation, musicians who submitted their own works more frequently were favoured compared to musicians who performed works by others. The plaintiff, who performed his works primarily himself, argued that the new distribution procedure would place him at an unreasonable disadvantage and that he would thereby lose income. Furthermore, the plaintiff argued that the PRO procedure could not be applied without a resolution of the members' assembly.

Court's Decision

The Regional Court (LG) Berlin had dismissed the action, the musician's appeal to the Court of Appeals (Kammergericht) was unsuccessful. The revision was rejected by the Federal Court of Justice (BGH) (Judgment of the BGH of 19.05.2005, Az.: I ZR 299/02). Although the PRO procedure was regulated neither within the licensing agreement between plaintiff and defendant, nor in the articles of association or the distribution plan, GEMA had a power of fair discretion for the distribution of proceeds. This followed from the fact that an exact allocation of proceeds to artists on the basis of the exploitation of performance rights was not possible and that only through a power of fair discretion could the collecting society fulfil its duties. The PRO procedure also complied with this power of fair discretion. Although it was not necessarily the best possible distribution arrangement, it was at least an appropriate arrangement.

The application of the PRO procedure was also not prevented by the fact that the introduction had not been decided by the members' assembly, but rather by order of the management board and supervisory board. Although this was not an association-law matter, but a contractual arrangement subject to the control of the General Terms and Conditions, this did not alter the fact that the defendant had a right to determine performance on the basis of fair discretion.

Conclusion

Collecting societies have a power of fair discretion with regard to the distribution of proceeds for the performance of their duties. This assessment does not change if the collecting society has failed to provide for the distribution procedure in its articles of association.