MFM fee recommendations and the license analogy method

Rightholders are entitled to damages when their photographs are used by third parties who have not been granted the necessary rights of use. Under German copyright law, damages are calculated according to the so-called license analogy method. This method assumes a fictitious license agreement upon reasonable conditions between the rightholder and the infringer. The rightholder then receives monetary compensation amounting to the royalties the parties would have reasonably agreed on.

Courts have different measures to determine the royalties the parties would have reasonably agreed on. On the one hand, they can reference license agreements closed by the rightholder in similar cases. If such license agreements exist, it is assumed that similar conditions would have been agreed on by the parties as well. If there are no such license agreements customary compensation rates and tariffs can be used as criterion.

For photographs such customary compensation rates and tariffs are arguably laid down in the fee recommendations of the “Mittelstandsgemeinschaft Fotomarketing” (MFM).

According to the Higher Regional Court in Hamm (decision of November 17, 2015 – file number: 4 U 34/15), however, the MFM fee recommendations do not reflect the customary compensation for the right to sublicense rights of use to a sales partner. In the case laid before the OLG Hamm, the rightholder had granted his client principal rights of use relating to more than 6,000 commissioned photographs taken by order of said client. Some of these commissioned photographs were later used by one of the client’s sales partners, against whom the rightholder then asserted claims for damages based on copyright infringement. The court held that even though the sales partner had in fact not been granted the necessary rights of use, the rightholder could not claim damages based on the MFM’s fee recommendations. The parties would not have agreed on the fees recommended by the MFM, but rather the rightholder would have agreed on a marginally higher license fee with his client and granted him the additional right to sublicense the photographs. Accordingly, the court said, the rightholder is only entitled to claim the difference between the actual license fee agreed on with his client and the license fee they would have agreed on had the right to sublicense been part of the license agreement.

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