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Copyright and the Digital Single Market

Simon Barker of Freeths discusses the status of EU proposals for a Digital Single Market, proposed changes in copyright law and the UK’s position in view of Brexit

In July 2014, ahead of his European Commission presidency, Jean-Claude Juncker published his political guidelines for a new Europe. Central to his agenda was a connected Digital Single Market (DSM). The expectations were ambitious and it has been said that the DSM could contribute €415 billion to Europe's economy, create jobs and transform public services.

Not surprisingly then, the proposed legislation is aimed at making the most out of digital technologies, and at the removal of restrictions to free movement of digital goods and services. Among the reforms were changes to telecoms regulation, data protection and EU copyright laws.

We have already seen (for example) agreement to end mobile phone roaming charges and approval of the General Data Protection Regulation. However, proposals for ensuring cross-border portability of online content services (services such as Netflix and Amazon Prime) across the EU are not as radical as one might assume. The proposed Regulations only provide for cross-border portability while the subscriber is present in another member state temporarily (for example, when on holiday).

So what of EU copyright reform? This consists of a series of key proposals which were announced by the Commission in September 2016:

  • a Regulation facilitating broadcasters by requiring only country of origin clearance for ancillary online services (for example, simulcasts or catch-up services) which are available across the EU;
  • a Directive and a Regulation to implement the Marrakesh Treaty: the former providing a mandatory exception to facilitate access to published works for people who are blind, visually impaired or print disabled, and the latter permitting the cross-border exchange of copies between the EU and other countries that are party to the Treaty; and
  • a proposal for a Directive on copyright in the DSM.

This article will take a closer look at the proposed Directive on copyright, what the EU Parliament has had to say on its first reading and whether leaving the EU means leaving the EU Digital Single Market.

Proposed Directive on Copyright in the DSM

The key provisions include:

  • creation of an ancillary right for press publishers;
  • a controversial obligation on online service providers (social networks, UGC platforms etc) to take measures to prevent infringement;
  • new mandatory exceptions to infringement;
  • facilitating the use of out-of-commerce works by cultural heritage institutions; and
  • providing rights of fair remuneration in contracts for authors and performers.

Ancillary right for press publishers (Article 11)

The Commission has said the proposed right aims to address the difficulties faced by press publishers in licensing their publications online. The problem comes in recouping their investment as against those who reproduce their content online for free.

Article 11 of the Draft Directive seeks to combat the problem by requiring member states to provide "publishers of press publications" with rights to control the "reproduction" and "making available to the public" rights that are available to authors. This ancillary right is intended to last for 20 years from January 1 in the year following the press publication.

A "press publication" is defined as a "fixation of a collection" of journalistic literary works. It is not entirely clear what that would constitute or whether the unauthorised online reproduction of a single journalistic work in a "collection" would amount to infringement.

However in its report dated March 10 2017 the EU Parliament recommended scrapping the creation of a new right and replacing it with a presumption of representation instead. This would allow publishers to defend the rights of authors by suing in their own name. The proposed amendment avoids the difficulty of defining the relationship between author's rights and a new separate right but it does not address the potential for conflict between authors and publishers who may have different attitudes toward enforcement.

Nevertheless the Parliament's proposal still has the potential to strengthen publishers' arms when it comes to combating online infringement. Whether this will achieve the Commission's aims is the subject of debate and some think the changes will be counterproductive. Similar laws have been introduced in Germany and Spain and it has been reported that these have led to delisting of press publications on news sites, resulting in reduced traffic to publishers' own sites.

Obligations on information society service providers (Article 13)

The Commission proposes to address the so-called value gap between licensed streaming services, which pay for the content they host, and intermediaries, such as social media networks and online platforms, which host infringing content. The e-Commerce Directive provides a "safe harbour" defence to intermediaries, with a notice and take-down regime.

However, rather than make amendments to the e-Commerce Directive, the Commission proposes Article 13 of the Draft Directive: That information society service providers that store and provide to the public access to large amounts of works or other subject-matter uploaded by their users shall, in co-operation with rightholders, take measures to ensure the functioning of agreements concluded with rightholders for the use of their works or other subject-matter or to prevent the availability on their services of works or other subject-matter identified by rightholders through the cooperation with service providers. The Commission suggests that such measures may include the use of content recognition technologies.

It is unclear whether "storing and providing" constitutes "use" that is infringing and whether service providers will benefit from the safe harbour or whether they will need to take measures to conclude licences anyway. The provisions seem at odds with the e-Commerce Directive, its safe harbour provisions and the assurance of no obligation to monitor information transmitted or stored.

The problem appears to have been recognised in the EU Parliament's report and the Parliament has suggested significant changes to the wording of Article 13. Consistent with the e-Commerce Directive it refers to service providers that are actively and directly involved in the making available to the public of user-uploaded content and where this activity is not of a mere technical and passive nature shall take appropriate and proportionate measure to ensure the functioning of agreements concluded with rightholders for the use of their works.

The proposal represents a significant limit on the scope of Article 13. According to the current law it is unlikely that content sharing websites will fall within the scope of making content available to the public. Therefore we can expect to see further discussion if the EU legislature is to properly address the so-called value gap.

Three new mandatory exceptions (Articles 3 to 5)

While certain public policy exceptions and limitations are harmonised at EU level these are subject to national implementation. In order to achieve legal certainty around cross-border uses the Commission has identified three areas of intervention requiring member states to provide mandatory exceptions allowing the use of copyright content without permission of the rightholder.

Article 3: Text and data mining

The UK government describes text and data mining as the use of automated analytical techniques to analyse text and data for patterns, trends and other useful information. It recognises that text and data mining usually requires copying of the work to be analysed. Following the Hargreaves Report in May 2011 (the UK's own review of Digital Opportunities) the UK government has already enacted an exception for text and data mining.

The Commission proposes to do the same by allowing reproductions (and extractions in the case of databases) if the researcher already has the right to read the work. The provisions provide that rightholders shall be allowed to impose network security measures provided they do not unreasonably restrict the researcher's ability to text and data mine. Furthermore, rightholders will not be able to contract out of the provisions.

The EU Parliament's report recommends some changes which appear in line with the UK position, emphasising that it is not text and data mining per se that requires exception but rather reproduction of the work in a way that enables its automated computational analysis.

In some ways the Parliament's proposals go further by placing an obligation on rightholders, who market works or other subject-matter primarily for research, to have an obligation to allow research organisations not having lawful access to those works etc, access to datasets that enable them to carry out text and data mining (providing rightholders have a right to request compensation).

Article 4: Use of works and other subject-matter in digital and cross-border teaching activities

The Commission proposes an exception or limitation permitting use of digital copies of works for teaching activities. To fall within this exception these activities must take place on the premises of an educational establishment or alternatively through a secure electronic network. The digital copies must also give an indication of the source, including the author's name, wherever possible.

However member states may (but are not obligated to) ensure that this exception or limitation is not too far ranging, and in particular it should not apply where adequate licences authorising the permitted acts are easily available in the market. Furthermore, member states may (but again are not obligated to) provide for fair compensation for any harm incurred by rightholders due to the use of their works under the exception or limitation.

As can be seen, there is some flexibility in the precise implementation of this article. That said, the UK's current exception does not provide for any such compensation, and so there is no reason to think it will introduce any such provisions following this Directive. Furthermore, the UK legislation prevents contracting out, suggesting that the UK government will not reduce the scope of the exception where licences are readily available

Article 5: Preservation of cultural heritage

The Commission proposes an exception permitting "cultural heritage institutions" to make copies of works or other subject-matter that are permanently in their collections, in any form or any medium, for the sole purpose of the preservation to the extent that is necessary. A "cultural heritage institution" is defined as a publicly accessible library or museum, an archive or a film or heritage institution.

The objective is to facilitate access to cultural heritage. These are in conjunction with the provisions below relating to the facilitation of cross-border access to "out of commerce" works where clearance of rights is complex.

Improvement of licensing practices and wider access to content (Chapter 1)

Under these proposals the Commission puts forward measures to facilitate the digitisation and licensing of out of commerce works. These are works that are not available to the public through customary channels of commerce and which are often held by cultural heritage institutions. The purpose of these provisions is to provide wider access to these materials and to guarantee the cross-border effect of licensing agreements.

Fair remuneration in contracts of authors and performers (Articles 14 to 16)

In its explanatory memorandum the Commission explains that authors and performers often have a weak bargaining position when licensing their rights. The Draft Directive proposes a "transparency obligation" whereby Member States will be required to ensure that authors and performers shall have the right to information about the exploitation of their works. The obligation may be adjusted where they are disproportionate or disapplied where the contribution of the author or performer is not significant.

The provisions go on to provide a "contract adjustment mechanism" so that authors and performers can request additional remuneration from the party with whom they contracted when the remuneration originally agreed is disproportionately low to the subsequent revenues and benefits derived from exploitation of the works or performances. Member states are also required to provide a voluntary, alternative dispute resolution mechanism.

The EU Parliament proposes two small amendments: recognising rights to equitable remuneration, and providing authors and performers with the option to appoint representatives for seeking contract adjustments on their behalf.

While similar provisions have precedent in some member states in the UK the proposals will be seen as unusual. Undoubtedly there will be concerns around having to adapt negotiations and business models to accommodate the contractual uncertainty which these changes will bring.

What of Brexit?

The UK government has said that it will adopt existing EU Regulations into national law up to the date of leaving the EU. However it has been silent on whether to adopt directives that have not yet been implemented (as could be the case with the Draft Directive on copyright, not least due to the divergence of opinion between EU legislative bodies).

What one can say is that the UK is ahead of reform in the digital market. The Hargreaves Report in 2011 (referred to above) and the Gowers Review in 2008 have both signalled a positive attitude toward change in favour of digital opportunities. Indeed the UK is arguably ahead in having implemented a number of changes already and in recommending further changes such as a private copying exception. Therefore it would not be surprising to find the UK adopting the proposed measures, if indeed they have the economic benefits contended for. Further, UK businesses operating in the EU will have to heed the changes there in any event.

Simon Barker
Simon Barker specialises in all fields of IP law. He is an experienced litigator with a practice focused on the protection, exploitation and enforcement of IP rights across all channels and media. Freeths’ team of highly regarded IP professionals offer a full service including filing and prosecution of trade mark and design applications, IP litigation, applications for injunctive relief, search and seize orders, domain name disputes, copyright and media litigation, licensing and transactional advice, and advice relating to advertising regulation and marketing law.

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