ECAD

Two recent decisions issued by the 3rd Panel of the Brazilian Federal Superior Court of Justice (STJ) confirmed State Court decisions ruling that movie exhibitors in Brazil should pay a percentage of their profits to the owners of copyrights on the soundtracks of the movies they show in their theaters.

The Brazilian STJ’s decisions were the outcome of lawsuits filed by ECAD (Brazilian Central Collection and Distribution Agency) against companies having theaters in the States of Rio de Janeiro (Southeastern Brazil) and Rio Grande do Sul (Southern Brazil), which had resulted in decisions issued by the Supreme Court of those states, ruling that exhibitors of cinematographical works are liable to pay 2.5% of the gross receipts from their ticket sales (the value of the public performance of movie soundtracks) from each showing in each theater. The defendants appealed to the STJ, which nevertheless upheld the decisions issued by the state courts.

Besides considering the 2.5% figure as excessive, the movie exhibitor appellants, involved in the two actions, also questioned other points such as the legitimacy of ECAD being able to collect the percentage on behalf of foreign titleholders of copyrights on soundtracks. This was an important issue because around 93% of the movies shown in Brazilian cinema theaters are foreign productions, most of them from the US. The STJ, however, reaffirmed that ECAD could legitimately represent the foreign titleholders as long as it was legally authorized to do so by the entities representing such titleholders (based on clauses 103 and 105 of Copyright Law No. 5.988/73 (expired) and clause 97 of Copyright Law No. 9.610/98 (current).

The continuing dispute over the actual percentage to be collected from theaters for soundtrack is not, however, confined only to the above suits. Two other major players in the cinema business in Brazil, Cinemark and UCI, are also involved in judicial actions against ECAD for the same reasons. n the state of Bahia (Eastern Brazil), ECAD filed a court action against UCI in 2000 and in October of the same year obtained a favorable decision from the Supreme Court in that State ordering the payment of the 2.5%. UCI decided to appeal this decision and sought permission to pay the 2.5% of receipts into a court fund in the meantime until a final decision was made. UCI’s request was denied and since the company had not made any payments to ECAD, the 1st Panel of the Supreme Court of the State of Bahia was compelled to issue an injunction ordering that the sound equipment of 10 theaters belonging to UCI in a shopping center in Salvador (capital of the state of Bahia) were to be switched off for one week.

The exhibitors of movies allege that the decisions issued by the STJ put an extra burden on a market already undermined by a lack of incentives and heavy taxation. According to recent surveys, Brazil has just 1,700 theaters with a potential demand justifying 3,500. Comparative data shows that Brazil has approximately 1 theater for every 105,000 inhabitants, whereas Mexico has a proportion of 1 to 44,000 and Argentina 1 to 37,000.