## Facts

- Musik‑Vertrieb Membran GmbH and K‑Tel International imported sound recordings into Germany from other European Community Member States.
- The recordings incorporated musical works protected by copyright.
- In the exporting Member State, mechanical royalties for reproduction/distribution had already been paid to the relevant collecting society.
- GEMA, the German collecting society for performing and mechanical reproduction rights, claimed German law gave an exclusive distribution right in Germany for the copies.
- GEMA sought an additional “supplementary” royalty on imports equal to the difference between the lower royalty rate paid abroad and the higher German rate.
- The Bundesgerichtshof stayed the national proceedings and referred questions to the Court of Justice for a preliminary ruling on compatibility with Treaty rules on free movement of goods and intellectual property.

## Issues

1. Whether sound recordings embodying copyright-protected works are “goods” subject to Treaty rules on free movement of goods.
2. Whether “protection of industrial and commercial property” (Treaty derogation) covers copyright.
3. Whether, after lawful marketing in one Member State with the rightholder’s consent, a collecting society may (a) prevent importation into another Member State, or (b) require supplementary royalties on importation to equalize different national tariff levels.

## Decision

- The Court held that sound recordings, even when incorporating protected musical works, are goods subject to the free-movement rules.
- The Court held that the Treaty derogation for “industrial and commercial property” includes copyright, particularly where commercially exploited through licensing affecting distribution.
- The Court held that where a product has been lawfully marketed in one Member State by the rightholder or with the rightholder’s consent, the rightholder cannot rely on national IP law to prevent its importation into another Member State (Community-wide exhaustion), and the same rule applies to copyright.
- The Court held that a collecting society may not demand additional fees on importation for such lawfully marketed recordings, even if the purpose is to neutralize differences between royalty rates in the exporting and importing states.

## Legal Principles

- Tangible copies embodying protected works remain “goods” governed by EU free-movement rules; IP claims affecting cross-border marketing may constitute unlawful trade restrictions unless justified.
- Copyright falls within the Treaty’s “industrial and commercial property” derogation, but only within limits consistent with maintaining the internal market.
- Once goods are placed on the market in a Member State by or with the consent of the copyright owner, rights in those copies are exhausted for intra-Community circulation; national copyright cannot be used to partition the market.
- A collecting society cannot condition market access on “top-up” royalties for imports where royalties have already been paid and the copies were first marketed with the rightholder’s consent.

## Conclusion

The Court applied Community-wide exhaustion to copyright in sound recordings, barring both import restraints and supplementary royalty demands for recordings previously marketed with the rightholder’s consent in another Member State, notwithstanding higher domestic tariff levels.


Musik-Vertrieb Membran GmbH & K-Tel Int’l Ltd. v. GEMA (Joined Cases 55/80 & 57/80), 1981 E.C.R. 147 (Ct. Just. 1981)