A new age for copyright regulation in the EU digital market - Part 1

Europe
The European Parliament voted on 26 March in favour of the Directive on Copyright in the Digital Single Market (the “Directive”). If, as expected, it is adopted by the Council of the EU (representatives of Member State governments) in mid-April, it will become law and every EU Member State will need to adapt its own copyright law to reflect the new Directive. We examine its provisions in two parts, In this first part, we concentrate on the two Articles of the Directive which have created the most controversy, Articles 15 and 17. Article 17 (known as Article 13 during the Directive’s passage) is designed to move the balance of power between copyright owners and sites that store massive amounts of user-uploaded content, or in the Directive’s jargon “online content sharing service providers” or “OCSSPs”. It changes the law underlying the current “notice-and-take-down” processes, whereby OCSSPs are only obliged to expeditiously remove content that infringes copyright upon the request of a rights holder. The Directive seeks to shift the responsibility to police and enforce copyright and remove infringing content from rights holders towards OCSSPs. Article 15 (known as Article 11 during the Directive’s passage) similarly creates a new right for press publishers (though it remains to be seen how enforceable that right will be.

Article 17 (né 13) – Use of protected content by OCSSPs

Under Article 17, OCSSPs are now primarily liable for any user-generated and user-uploaded content that infringes third party copyright, as they are treated as communicating it to the public. Under Article 17(1), OCSSPs will be required to obtain authorisation from copyright holders in advance to make such content available to the public on their platforms, failing which copyright holders may sue OCSSPs for infringement.

Under Article 17(4), OCSSPs can regain a safe-harbour, but only if they can demonstrate they have satisfied three tests; OCSSPs must (i) use their best efforts to obtain authorisation from rightsholders; and (ii) use their best efforts to ensure the unavailability of authorised content which has been identified by rights holders; and in any event (iii) act expeditiously to remove any unauthorised content after being notified (i.e. “take down”) and use their best efforts to prevent future uploads (i.e. “keep down”). The Directive provides that what constitutes “best efforts” should be judged proportionately, taking into account the type of content, audience and size of the service offering and the availability of suitable and effective technology. However, the use of “best efforts”, a concept largely unknown in EU jurisprudence, is an invitation to drawn-out litigation, ultimately before the Court of Justice of the EU.

Article 17 contains some exceptions to the obligations on OCSSPs. A lighter regime will apply to start-ups that satisfy the following cumulative requirements: are less than three years old, have an annual revenue of under €10 million and receive under five million monthly users (a business less than three years old but topping €10 million of revenue will have “take down” obligations and thereafter 5 million uniques will trigger “keep down”).
In order to comply with Article 17, those lobbying against the legislation have suggested that OCSSPs will likely employ content screening mechanisms, such as upload filters, rather than concluding licensing agreements with all copyright owners whose work may be uploaded to their platforms. This has given rise to suggestions that “over-blocking” will lead to censorship and will conflict with the Directive’s reiteration of Article 15 of the E-commerce Directive, namely that service providers should not have any obligation to generally monitor user-generated content.

In order to mitigate the risk of over-screening, the Directive now makes clear that Article 17 does not apply to quotation, criticism, review or content that is used for the purpose of caricature, parody or pastiche. This means, for example, that gifs and memes may typically be shared without Article 17 applying. The Directive also makes clear that Article 17 will not apply to non-profit online education platforms and encyclopedias (such as Wikipedia), open source software platforms, online retail, market places, business to business cloud services and electronic communication services. There are, however, some services where it is unclear whether or not they would be an OCSSP – for example dating sites, Twitter, “below the line” comments.

As an additional “check and balance”, while OCSSPs must provide right holders with a mechanism by which to request removal of or disabling of access to their works that have been uploaded by the OCSSP or third parties, they must equally provide a complaint and redress mechanism for users who dispute the removal of or disabling of access to user-uploaded content. These complaints must be processed without undue delay and the decision to remove or disable access to content must be subject to human (not just automated) review. EU countries must ensure that out of court redress mechanisms are available for the settlement of any disputes that arise as a result of Article 17, as well as access to courts or other judicial authorities, to ensure that OCSSPs will not be the sole arbiters of disputes.

The Directive envisages that the European Commission will issue guidance following stakeholder dialogue on how OCSSPs can best implement these mechanisms. This guidance will aim to balance the rights of copyright holders and the use of exceptions and limitations. We will monitor this dialogue and provide updates when any relevant guidance is published.

Despite the massive controversy surrounding Article 17, we are sceptical that the world of user uploaded content will change massively in the short term. The largest OCSSP, YouTube, already has agreements with many different types of rightsholder and while the negotiation balance may have been altered, that is likely to result in only very gradual change to the underlying commercial agreements (as happened following the introduction of “retrans fees” first in the US and more recently in the UK). The so-called value gap will likely take a long time to close. On the other hand, Article 17 may prove to be a strong enforcement tool against overt pirate sites (eg PirateBay) who have previously relied on “safe harbours”.

Article 15 (né 11) – Protection of press publications concerning online uses

Article 15 regulates the reproduction of press publications issued after the Directive enters into force. It introduces an ancillary copyright for publishers that post or make available press articles or extracts. The right will expire at the end of two years measured from 1st January after publication. This right should enable an original publisher to levy a fee from an Internet service that re-publishes excerpts from that publisher’s (on- or off-line) publications, without regard to who owns any underlying authorial copyright. Authors will be entitled to an “appropriate” share of this revenue.

The exceptions to Article 15 include scientific and academic publications, blog posts, reproduction for private and non-commercial uses, hyperlinking and the use of “single words or very short extracts”. This means that snippets of news articles may be shared without the rights granted by Article 15 kicking in. The parameters of what constitutes a “very short extract” are unclear and it seems likely that test cases will result in further guidance from the Court of Justice of the EU.

It remains to be seen how effective Article 15 will be in shifting the negotiation balance between tech platforms (such as Google) and publishers. The experience of the two EU countries who have sought to introduce something similar (Spain and Germany) is not positive for publishers, because the removal of content from search results can cause a significant drop in traffic reaching a publisher’s site. The tech platforms still hold most of the cards in that regard.

Next stages

The Directive must now be approved by the Council of the European Union (the representatives of national Member State governments), which is expected to take place in mid-April. Shortly thereafter, the formal publication of the text in the Official Journal of the EU will start the clock ticking on a two year period during which the national legislator in each Member State must adapt its laws to be compliant. As some aspects of the Directive (mostly those discussed in Part 2) give material leeway to Member States over how to implement, this next stage is likely to see further strong lobbying.

Call to action

Please consider whether (alone or as part of a trade associations) you wish to influence implementation in the Member States over the next 2 years. Please also contact us if you have any questions about how the Directive will impact on your business or for any advice on compliance with the Directive or drafting licensing agreements.

Brexit

The vote on the Directive is expected to be a mere formality and therefore it is presumed that it will become law in the EU some time in April or May. However, the UK will only be obliged to implement the Directive in the event that the UK leaves the EU with a deal and the implementation deadline falls within a transition period. Mrs May’s deal originally proposed a 21 month transition period from 29 March 2019, so it seems likely that the deadline for implementation will fall after the expiry of any transition period, and, therefore, that the Directive will never directly apply in the UK. However, the UK government may independently choose to implement the same or similar provisions, assuming that parliamentary time may be found after the Brexit process is concluded and UK businesses (for example OCSSPs) doing business in Europe will need to comply as the primary liability under Article 17 will place the “communication to the public” in the countries where the service is intended for reception.