Digital Media Business in Switzerland and the enactment of the revised Swiss Federal Copyright Act

Introduction and relevance

The current Swiss copyright legislation essentially consists of the Federal Act on Copyright and Neighbouring Rights of 9 October 1992 (FACN). The FACN has been subject to a comprehensive revision driven by an expressed need to adjust Swiss copyright law to the challenges of the new digital age (a global trend that can also be observed in European Union legislation). In 2012, a Swiss copyright task force called AGUR was established to analyse modernization needs in today's copyright act and in 2015, the Swiss Federal Council sent a first legislative bill on the revised FACN into consultation proceedings with various stakeholders. In November 2017, the Swiss Federal Council published a second legislative bill and handed it over to Swiss parliament for a final debate. On 27 September 2019, the Swiss parliament has approved the revised FACN (NFACN). The referendum deadline for the final bill passed by the Swiss parliament expired on 16 January 2020, which led the Swiss Federal Council to enact the revised NFACN as of 1 April 2020. The revision of the FACN proves highly relevant for online-based media-providers dealing with copyrighted content with an exposure to Switzerland. The following provides a short summary on select relevant changes in the final version of the NFACN and related case law in Switzerland.

Aims of the revision

The NFACN bears a strong focus on improving anti-piracy measures available to copyright-owners. The Swiss Federal Council has expressed its will to strengthen the rights and interests of creative artists and the cultural industries by taking a more resolute approach to infringing online content. At the same time, the NFACN provides for adaptations to facilitate the use of content among researchers and libraries and provide a more efficient management of video-on-demand rights. In particular, new rules on the management of copyrights by collective societies are introduced to facilitate the exchange of digital content. In essence, the NFACN is an attempt to strengthen copyright holders' enforcement options in digital space without excessively constricting user rights or stifling the digital economy.

Main new features of the NFACN summarized

"Stay-down" obligation for internet hosting providers

The NFACN imposes a "stay down" obligation applicable to internet hosting providers. Hosting providers must ensure that copyright-infringing content, once taken down from their platform, remains off their servers (article 39d, paragraph 1, NFACN). The "stay down" obligation has been introduced since experience has shown that a "take-down" obligation alone (as ordered by a court or carried out under self-regulated notice-take-down-procedures) is not efficient, if such infringements occur repeatedly (e.g., if infringing content is re-uploaded). However, the "stay-down" obligation proposed is not absolute: Hosting providers concerned must only take measures reasonably required from a technical/economic viewpoint and taking into account the potential risk of infringements (article 39d, paragraph 2, NFACN).

Unlike foreseen in the first draft of the NFACN, the adopted bill has decided to drop content blocking obligations applicable to access providers as this was considered an unnecessary restriction to digital trade and not reasonably bearable by access providers. In this context, a recent landmark ruling very much in line with this principle under the NFACN is noteworthy: On February 8, 2019, the Federal Supreme Court (FSC) held that internet access provider Swisscom cannot be obliged to block copyright infringing content unlawfully uploaded by third parties on online portals (via IP blocking, DNS blocking or URL blocking). In its decision, the FSC made clear that the provision of technical infrastructure alone, which makes access to the World Wide Web possible at all (which is the core function of access providers), cannot be deemed an adequate causal contribution to copyright infringements conducted over a particular hosted online-platform. In particular, the claimants could not make a showing that alleged third party infringers were customers of Swisscom and had benefited from Swisscom's specific access provider services. As a consequence, access providers cannot be held jointly liable for copyright breaches committed by third parties over the internet.

Legal basis for processing of personal data in connection with infringements

The NFACN states that the processing of personal data for criminal prosecution of copyright infringements conducted over the internet as well as the enforcement of civil damage claims within such criminal proceeding is permissible (article 77i, paragraph 1, NFACN). This right includes the right to store such data and its submission to the prosecuting authorities. However, right holders must transparently disclose the purpose and method of the processing envisaged (article 77i, paragraph 2, NFACN) and are not allowed to link the personal data collected with data collected for other purposes (article 77i, paragraph 3, NFACN).

The new provision is peculiar: From a systematic point of view, data protection matters are to be governed in the Swiss Federal Act on Data Protection (FADP), not in a copyright act. The provision is closely linked to an old decision of the FSC against the company "Logistep" which had offered copyright holders software-based features to seek data of potential infringers (e.g., IP-addresses collected in peer-to-peer-networks) to use it for criminal prosecution purposes. The court held that such data processing was illegal since it was not transparently disclosed to data subjects and the private interest of copyright holders to enforce their rights was not considered overweighing (decision of September 8, 2010, FSCD 136 II 508). The decision was harshly critized to shield off copyright offenders in the anonymous web instead of copyright owners in the pursuit of their rightful claims. The new provisions in the NFACN are an attempt to correct this (most likely incorrect) decision with a more specific provision ("lex specialis") in the NFACN. Nevertheless, the provisions still refer to "personal data"; therefore, the definition of personal data under the FADP (i.e., an identifiable natural person or legal entity) should remain a prerequisite for data protection applicability. In view of the authors, processing of non-personal data should remain freely permissible as it is under today's FADP and under the NFACN. As regards the duty to transparently disclose data processing (see article 77i, paragraph 2, NFACN), the accompanying message to the bill stressed out that such notification can be provided generally over a website, even if not contained in general terms and conditions or data privacy notices available.

Directory privilege

The NFACN facilitates the use of the inventories of public libraries, educational institutions, museums, collections and archives ("memory institutions"). To enable these institutions to present their stored content to the public in a contemporary form, not only the author, the title and the number of the holdings should be visible from online searches but also the cover page, the index or, in the case of scientific works, a summary. To that end, memory institutions are granted permission to reproduce short extracts of works or copies of works in their directories used for cataloguing and communicating their inventories, provided that this does not impair the normal exploitation of copyrighted works (article 24e, NFACN).

Scientific exceptions to copyright

In order to facilitate research and strengthen Switzerland as a research location, copyright holders will no longer be able to prohibit copies that are generated by technical procedures for scientific purposes. The NFACN stipulates that copies may be made free of charge if they are made and stored mainly for the purpose of scientific research, if they are the result of a technical process and if lawful access to the works to be reproduced is granted (article 24d, paragraph 1 and 2, NFACN). However, this exception is not applicable to computer programs (article 24d, paragraph 3, NFACN). In addition, the new provision does not differentiate between commercial and non-commercial research.

Exception to copyright for the use of orphaned works

Works are considered orphaned if their right holder is unknown or untraceable. Despite a public interest, such works can currently not be legally used due to the missing consent of the right holder. The NFACN solves this issue by allowing the use of orphaned works if (i) available in the inventories of memory institutions (such as libraries) and (ii) manufactured and reproduced or made accessible in Switzerland. Collective societies are to collect and administer royalties for orphaned works to ensure that right holders receive a royalty once they are identified (article 22b, NFACN). If they are not identified after 10 years, the collective society may transfer the collected funds to social charity or cultural funding institutions (article 22b, paragraph 6, NFACN).

Extended duration periods for performer rights

The duration of protection for performances under the so-called "neighbouring rights" (a separate category of protection provided in the FACN for performers and producers of sound carriers which does, however, not amount to a fully-fledged copyright) will be extended from 50 to 70 years (article 39, paragraph 1, NFACN). This extension is intended to reduce the imbalance between the increasing online use of works and stagnating revenues for performers. According to the Swiss Federal Council, the extension is required since performers frequently start their career at a relatively young age and their performances are often no longer protected late in their lives under the current duration of 50 years; for some performers, this may cause an income gap at the end of their lives. Furthermore, the extension of the duration would give producers of sound carriers more time to amortize their investments.

Extended protection for photographies

The FACN currently still in force only protects photography if it is deemed an artistic intellectual creation with an individual character. The NFACN expands this notion and includes photographic reproductions and reproductions of three-dimensional objects produced similarly to photography, but which do not necessarily have an individual character (article 2, paragraph 3bis, NFACN). As a result, all kinds of photographs will be protected under the revised FACN, provided that they depict physically existing three-dimensional objects. Such works (without an individual character) will be protected for 50 years after their production (article 29, paragraph 2, lit. abis, NFACN). Photographic reproductions and three-dimensional images produced similarly to photography with an individual character on the other hand remain protected for 70 years (article 29, paragraph 2, letter b, FACN).

Royalties for video-on-demand

In the last years, the rent of movies and TV-episodes on videotape or DVD has drastically declined. The majority of today's consumers prefers to access content in digital form over platforms in the internet (video-on-demand or so called "streaming"). Copyright holders have the exclusive right to make their works and performances available online. In the recent years, collective societies have established a practice to collect royalties owed directly from the operators of the video-on-demand platforms even though it is not subject to a mandatory collective licensing scheme under the FACN. Copyright owners and performers are in favour of this practice as they deem it efficient (instead of negotiating with multiple online-users). Experience has shown that large international operators of online platforms are not always familiar with this practice. This is why the Swiss practice will now be enshrined in the new legislation and applied for rights of performers as well (e.g., actors, performing musicians) (article 13a, NFACN and article 35a, NFACN). It is pertinent to mention that there are exceptions to royalties for video-on-demand (article 13a, paragraph 2, NFACN and article 35a, paragraph 2, NFACN). For instance, the right to royalties will be excluded if right holders and/or performers would exploit their work personally (e.g., market it themselves on YouTube) instead of having their rights assigned by contract to a producer (as is frequently the case in the creative industries). Moreover, film music will not be subject to the obligation to pay royalties (article 13a, paragraph 5, NFACN). This stems from the fact that the current procedure, where collective societies negotiate with the video-on-demand platforms on behalf of the musicians, seems to work without any problems according to the Swiss legislator (parliament).

Extended collective licenses

The NFACN provides for extended collective licences (ECL). Collective societies may enter into license agreements with users relating to the mass use of published copyrighted works that are not subject to mandatory collective licensing schemes (article 43a, paragraph 1, NFACN). Right holders who do not wish to be bound under such a collective license scheme may request to exempt their rights from being administered under such scheme (opt-out-principle; see article 43a, paragraph 4, NFACN). In order to enable right holders to exercise their opt-out right, the collective societies shall notify the extended collective licenses before they come into force, e.g., through a website (article 43a, paragraph 3, NFACN).

Electronic usage notifications

Anyone who performs or has performed works protected by copyright (such as a concert organiser, a radio station or even a coffee shop, which plays music as background entertainment, for example), must provide the responsible collecting society with relevant usage data. The NFACN stipulates that such information must be provided electronically (i.e., in a form that corresponds to the state of the art and permits automatic data processing) (article 51, paragraph 1, NFACN). In addition, collective societies are entitled to share/forward such data to/with one another (e.g., a collective society for musical works to a collective society for visual works) (article 51, paragraph 1bis, NFACN). By this means, copyrighted work users will have to provide the information to only one collective society once.

Favourable tariff treatment

Public and publicly accessible libraries can benefit from a reduced tariff for the rental of copies of works (article 60, paragraph 4, NFACN). The legislator is of the opinion that there is a public interest in libraries which is worthy of protection and which should be taken into account when establishing the tariff.

No personal use exception for hotels, hospitals, prisons and holiday homes

One of the most controversial discussion in the parliamentary deliberations was whether television and radio listening in hotel rooms, hospitals, prisons and holiday homes should be covered by the personal use exception (article 19, FACN) and therefore be free of charge (for the respective hotels or similar institutions). The National Council had decided to define this use of public works as personal use in order to relieve the burden on the institutions mentioned. The Council of States, on the other hand, was of the opinion that this would result in major financial losses for cultural workers. Eventually, the National Council decided to follow the Council of States and abolish the proposed personal use exception. Thus, hotels, hospitals, prisons and holiday homes must continue to pay copyright fees for the use of public works on their premises.

Two new international treaties

In course of the revision of the FACN, the Swiss parliament ratified the Beijing and Marrakesh Treaties of the World Intellectual Property Organization (WIPO) on 21 June 2019. The Beijing Treaty on Audiovisual Performances attempts to improve the protection of actors at an international level. The Marrakech Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disables attempts to improve the situation for people with disabilities. The Beijing Treaty has already been implemented under the current Swiss legal system so that no legislative change was required. In contrast, slight amendments to the FACN have been necessary to implement the Marrakesh Treaty (see e.g., article 24c, paragraph 3, NFACN). These changes will enter into force on 1 April 2020 as well.

Outlook

The NFACN modernizes and adapts copyright to the realities of the digital age and strikes a balance between enhanced copyright enforcement in the web on the one hand and enhances user accessibility with the help of collective licensing schemes, electronic data exchange mechanisms on the other hand which may also contribute to closing the value gap claimed by copyright holders.

Unlike in the European Union, where a comprehensive copyright reform is also topical, Switzerland has neither institutionalized (i) a duty of online-platform providers to pre-examine uploaded content and seek permission from copyright holders before they have content uploaded (which may have to be conducted with the help of so called "upload filters") nor (ii) a special remuneration right for journalists/publishers when displaying titles or small fragments of press wordings ("snippets"). On March 26, 2019, the newly revised European Copyright Directive has come into force. It has introduced a special remuneration right for journalists/publishers which does not amount to a full copyright, but protects them against the use of their published news – irrespective of their copyrightability (in German: "Leistungsschutzrecht"). Furthermore, in article 17, the directive has introduced a pre-examination duty of content for platform operators before sharing any uploaded content.

The revision of the European Copyright Directive has triggered huge protests worldwide and remains controversial up to this date. It is uncertain to which extent Switzerland could be affected by the directive. Indeed, Switzerland-based online operators could come into conflict with foreign-based publishers based on the provisions of the European Copyright Directive. As it is still unclear how the European member states implement the revised European Copyright Directive, the Swiss legislator decided not to introduce any special remuneration right for journalists/publishers (in German: "Leistungsschutzrecht") for the moment. However, the legislator envisages to closely follow the developments in the European Union and to review Swiss copyright law critically in this regard.