Musicians, Memes and Mandatory Exceptions: an overview of the proposed Directive on Copyright in the Digital Single Market from Francine Cunningham, Bird & Bird Senior Public Affairs Manager in Brussels. 

The proposed EU Directive on Copyright in the Digital Single Market can be seen as an attempt to apply ‘European values’ to aspects of the digital economy. If formally adopted by the European Parliament during the plenary session of 26-28^th March and subsequently endorsed by the Council, it will shift the balance of responsibilities between various stakeholders in the copyright value chain, including authors, performers, producers, publishers and online platforms. 

Never mind the ‘Value Gap’

A crucial point of contention in the proposed Directive has been Article 13, regarding the specific role of Online Content Sharing Service Providers (“OCSSPs”). According to the Commission, Article 13 addresses the legal uncertainty regarding whether OCSSPs that provide access to a large amount of content uploaded by their users, engage in copyright relevant acts and need to obtain authorisations from rightholders. Record companies and collecting societies, in particular, have complained that the existing uncertainty affects their ability to negotiate appropriate remuneration for such use of their works, resulting in a “value gap” between the value that services such as YouTube extract from music and the revenue returned to the record companies and artists. Meanwhile, opponents have condemned Article 13 as a censorship machine that would introduce widespread use of “upload filters” and have called for the legislation to be stopped in order to protect the use of memes, or indeed to “save the internet”.

Article 13 stipulates that OCSSPs perform an act of communication to the public, or an act of making available to the public, when they give the public access to copyright protected works uploaded by its users. In such circumstances, the service provider cannot invoke the limitation of liability established in Article 14 (1) of the e-Commerce Directive (2000/321/EC). This provision has been strongly criticised by online platforms and service providers which regard the limitation of liability provisions in the e-Commerce Directive as a fundamental building block of the digital economy.

Nevertheless, there are significant mitigating factors included in the new rules. OCSSPs will not be liable if they demonstrate that they have made: (i) “best efforts” to obtain authorisation; made “best efforts” to ensure the unavailability of specific works highlighted by rightholders; and have acted “expeditiously” to remove access to notified works and to prevent their future upload (Art. 13 (4). Furthermore, new online content sharing service providers, whose services have been available to the public for less than three years and which have an annual turnover below EUR 10 million, are subject to a lighter regime. While serious legal questions have been raised about the compatibility of this provision with the e-Commerce Directive, the draft Copyright Directive states that this article shall not lead to any general monitoring obligation.

Some in the recording industry and collective management organisations will welcome this legislation and will now begin preparations to use the Article 13 to negotiate more competitive licenses terms with user upload platforms.  Others will be concerned that the mitigating clauses may have provided too many ways for service providers to limit liability for content uploaded by their users. There is a real prospect of more discussion and potential litigation around what exactly constitutes “best efforts”, which in itself appears to be an American-inspired term.

Representatives of the audio-visual industry, who are generally more focused on enforcement than licensing in relation to user upload platforms, will be concerned that Article 13 could prove to be less helpful than recent case law from the Court of Justice of the European Union, or could impact a forthcoming ruling in a case involving Google. The audio-visual sector will therefore be looking to interpret the final text in a way that does not further complicate their copyright enforcement activities.

New reporting obligations for media businesses

Article 13 should be viewed in conjunction with the provisions concerning fair remuneration with respect to exploitation contracts of authors and performers (Articles 14-16). While creators will welcome principles in these provisions, media businesses will be concerned about the additional data reporting obligations. The new rules will require media businesses to ensure that authors and performers receive, on a regular basis and at least once a year, up-to-date, relevant and comprehensive information on the exploitation of their works and performances (Art. 14). Audio-visual producers and record companies, in particular, will be concerned that such detailed information about modes of exploitation could lead to requests for higher remuneration from creators and lead to uncertainty around costs. 

Producers who take the risk of investing in creators will also have to prepare carefully for the proposed contract adjustment mechanism, whereby authors, performers or their representatives can claim additional remuneration when the amount originally agreed turns out to be “disproportionally low” compared to all the subsequent revenues. Furthermore, the proposed right of revocation for authors and performers, if their work has not been exploited for a certain length of time, has the potential to necessitate significant changes to the business relationship between producers and creators.

Extra, extra! Read all about press publishers’ rights

In an era where EU Member States are increasingly concerned about the circulation of “fake news” online, the European Commission has declared that the proposed new, exclusive right for press publishers (Article 11) will help to recognise the essential role of the press in democratic society. The draft Directive (Recital 31) notes that press publishers face problems in licensing the online use of their publications due to the massive use of parts of press publications by news aggregators and media monitoring services. The proposed Directive therefore aims to provide legal recognition of press publishers as rightholders.

Specifically, Article 11 grants press publishers a two-year term of protection in copyrighted works, for the reproduction and making available to the public of press publications, in relation to online uses by internet service providers and aggregators. The use of individual words or “very short extracts” is not covered by this provision. As a response to online campaigns against what opponents have characterised as a “link tax”, Article 11 also states that this provision does not apply to private or non-commercial uses of press publications by individual users, or to hyperlinking. Furthermore, journalists should be entitled to an “appropriate share” of the revenues press publishers receive for the uses of their press publications by information society service providers. This point will require careful preparations by press publishers since negotiations between publishers and journalists’ trade unions are subject to sometimes tense negotiations at national level.

European press publishers will now begin preparations to use Article 11 as a tool to negotiate more strongly with digital platforms. News aggregators and media monitoring companies in turn will have to prepare for any additional costs of obtaining licenses from press publishers, or in some cases modify their current practises to avoid potential costs. Additionally, there is the potential for further litigation regarding the exact meaning of “very short extracts”.

One sting in the tail for the British press is that this new right would only apply to publishers established in a Member State (Recital 32), so in a post-Brexit scenario UK-based publishers would not necessarily benefit from the new right.

Miners at the copyright coalface

The proposed Directive contains measures designed to adapt exceptions and limitations to the digital and cross-border environment in the areas of education, research and preservation of cultural heritage. These measures include two new mandatory exceptions to enable text and data mining (TDM) which have gone somewhat under the radar while more controversial provisions grabbed the headlines.

Article 3.1 of the proposed Directive provides a mandatory exception for reproductions and extractions made by research organisations and cultural heritage institutions, in order to carry out text and data mining of works to which they have lawful access, for the purposes of scientific research. The precise meaning of “lawful access” has been much debated, but Recitals 9 and 11b refer to having a subscription or open access licences, as well as access to  content that is “freely available online.”

When the European Commission published its original proposal for the Directive back in 2016, technology and data analytics companies expressed concern that the introduction of a TDM exception could call into question mining operations that had been carried out for years and even expose them to retrospective liabilities. The proposed solution to this issue has been the inclusion of an additional, mandatory exception (Article 3a) which provides for a broad exception for reproduction and extractions of lawfully accessible works for the purposes of text and data mining. 

While this second TDM exception sounds sweeping, it includes an opt-out for rightholders. The exception should only apply where there is lawful access to the work and insofar as the rightholders have not reserved the rights in an “appropriate manner”.  In the run-up to implementation of the Directive, publishers will have to make their wishes with regard to TDM explicit in their terms and conditions, while data analytics companies will have to consider how to access the data they require within these new legal parameters. 

Moreover, it could be argued that Article 3a effectively reverses the normal presumption of the subsistence of copyright in a work, so sits uneasily in the existing European copyright acquis.

Moving the dial in favour of some, but not all

To sum up, the proposed Directive on Copyright in the Digital Single Market does tip the overall balance of the copyright framework somewhat in favour of certain, but not all, creators, rights holders and users. At the same time the proposed rules would attribute significant new responsibilities to online platforms and service providers, as well as ushering in substantial reporting obligations for producers in the copyright value chain. Given the uncertainty around the wording of a number of articles, it is highly likely that the Court of Justice of the European Union will be called upon in the next years to clarify and interpret some of the more confusing provisions.

If this Directive is indeed finalised in the coming weeks, technology companies will have to step up their preparations for what promises to be an increasingly interventionist approach of European legislators with respect to regulating the role of online platforms in the digital economy. While the European debate around this proposed Directive has been volatile and often divisive, these tense negotiations may be seen as a mere curtain-raiser for the battle over the review of the e-Commerce Directive that is expected to come during the next mandate of the European Commission and Parliament.

This is an updated version of an article that was first published in Intellectual Asset Management (IAM) magazine.