August 12, 2019

Introduction

The Directive laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes[1] (the SatCab Directive[2]) began the legislative process as a hefty proposed Regulation but emerged as a relatively slim, albeit complex, Directive. This hotly contested instrument extends two longstanding EU rights-clearance mechanisms tentatively into the digital environment and provides a rather intricate solution for so-called direct injection. The outcome is mostly a relief for the audiovisual sector. However, the important principles of copyright territoriality, individual exercise of rights and contractual freedom have taken another, albeit limited, hit at the hands of the EU legislator.

The legislative process leading to the adoption of the SatCab Directive began on 14 September 2016 when the European Commission presented its second package addressing copyright in the Digital Single Market (DSM),[3] including a Proposed Broadcaster Regulation (Commission’s Proposal or PBR).[4]  The instrument (by then a Directive) was finally approved by the European Parliament (EP) on 28 March 2019 and was rubber which was published in the Official Journal of the European Union on 17 May 2019, will enter into force on 7 June 2019, after which time the Member States, which retain significant discretion in certain areas, have two years (until 7 June 2021) to transpose the Directive in their national laws. Transitional provisions in the Directive mean that country of origin principle will only apply to contracts in force on 7 June 2021 as from 7 June 2023 and to pre-existing authorisations for acts of communication to the public (CTTP) in the case of pure direct injection (DI) as from 7 June 2025.

With Brexit looming, the Directive may have limited import within the UK.

Background

The Commission’s Proposal was aimed at promoting the cross-border provision of online services ancillary to broadcasts and facilitating retransmissions of TV and radio programmes originating in other Member States by adapting the existing legal framework—i.e. the two pillars of Council Directive 93/83 (1993 SatCab Directive[5]), namely: (i) the country of origin principle (CoO) for CTTP by satellite; and (ii) mandatory collective exercise of the cable retransmission right. The Commission’s Proposal envisaged the extension of these two pillars to other means of transmission and re-transmission respectively to reflect better what it considered to be digital realities and ensuring wider online access to TV and radio programmes by consumers across the EU—a key objective of the DSM strategy.

The PBR sought to extend the CoO principle to certain online transmissions, thus enabling broadcasters which are based in one Member State to potentially make content available online across the whole of the EU on the basis of having cleared the rights for one Member State only, without having to obtain the rights to exploit such content in other Member States. Notably, the Commission’s Proposal made no distinction between (and no limitation was placed on) the types of content covered.

Indeed, at the beginning of its mandate, the Commission had signalled an even more ambitious proposal which would have affected a broader range of online services. This was strongly opposed by the audio-visual (AV) sector and ultimately it was watered down to focus on broadcasting organisations.

The PBR also sought to extend the system of mandatory collective exercise of cable retransmission rights (mandatory collective rights management or MCRM), which is couple with a so-called broadcaster veto, to other forms of retransmission including in particular IPTV, Digital Terrestrial TV (DTT), satellite and mobile platforms but not the open internet.

The Commission’s Proposal sought to erode copyright territoriality in respect of broadcasters’ “ancillary online services” (catch-up, simulcast and promo materials). Given the detrimental impact on the financing, production and distribution of AV works, the Commission’s Proposal was vigorously opposed by the AV sector (with the exception of public service broadcasters (PSBs)), especially given the interplay with the Commission’s (then) ongoing Pay-TV investigation,[6] where the impact of EU competition law rules on territorial exclusive licensing and contractual freedom were of particular concern to the AV sector.[7]

In addition to the PBR’s inherent impact on territoriality, the extension of the mandatory collective exercise of the retransmission rights regime beyond cable could (i) limit the ability of individual rightholders to license their content directly; (ii) undermine the value of individual works; and (iii) hinder the ability of producers to negotiate directly the terms of use of their content including with regard to content protection.

Finally, the Commission’s Proposal was also silent on issue of so-called “direct injection” (DI)—where the signal transmitted by a broadcaster is not capable of being received by members of the public and instead is intended for reception only by third party commercial platform operators which transmit the signal to their customers as part of a package of channels.[8]

The EP and the Council of the European Union (Council)—the Member States) each decided, separately, to make significant amendments to the Commission’s proposal.[9] The inter-institutional (trialogue) negotiations to reconcile the respective approaches began in February 2018.[10]  These focused on the following four key areas:

• the scope of the country of origin rights clearance mechanism;
• mandatory collective rights management for retransmissions;
• direct injection; and
• application and transition.

Given the divergence of views on these areas, the negotiations were characterised as “difficult” and “on the edge of complete breakdown on several occasions”,[11] however, agreement was finally reached on 13 December 2018.

Key aspects of the Directive

The final text of the Directive diverges significantly from the Commission’s Proposal. The legal nature of the instrument changed (from a Regulation to a Directive[12]) as did its legal basis.[13]  As regards the aim and content of the Commission’s Proposal, the changes (i) reduce the scope of the types of television programmes to which the extension of the country of origin would apply; (ii) further extend the scope the MCRM regime for retransmission to the Internet; and (iii) insert provisions on DI.

Concerning the CoO principle, the agreed text represents a significant narrowing down of the Commission’s Proposal. The EP in particular was sympathetic to the concerns of the AV sector and, in the end, a much narrower concept was retained; essentially limiting the extension of the CoO principle to “ancillary online services”, as defined by the Directive, in respect of (i) radio programmes; and (ii) broadcasters’ TV programmes which are news and current affairs and broadcaster’s own fully financed productions—i.e. exclusively financed by the broadcaster (although the funds used may come from public finds—e.g. subsidies). For these purposes, a broadcaster’s own productions would exclude independent productions and co-productions. However, the productions from other companies within a broadcaster’s group would generally be covered to the extent that they are not “independent from” the broadcaster. The CoO principle will not apply to the television broadcasts of sports events (though radio broadcasts of sport are caught).

The CoO principle works by means of a legal fiction which “deems” that acts implicating the relevant exclusive rights (CTTP and in some cases reproduction) take place solely in the Member State where the broadcasting organisation has its principal establishment. In the case of the licensing of content (individual works, packages or output deals) by producers (or their assigns) directly to vertically integrated pay-TV platforms for that platform’s own channels, the operation the Commission’s original proposal seemed rather straightforward. However, in the case of channel providers which are distinct from the pay-TV platform, the issue was complicated by a lack of a definition of broadcasting organisation. Was it the channel provider or the pay-TV platform which should have been considered the broadcasting organisation for the purposes of application of the CoO principle? In the latter scenario, the producer of the underlying content has initially granted a license to a channel provider which may or may not have included the relevant rights for the relevant ancillary services. The channel provider is akin to a content aggregator, commissioning its own content and also acquiring content from a variety of sources. In most cases, the business model of this “aggregator” consists in licensing carriage of its channel to the pay-TV platform—it may not be offering its own ancillary services.

Ultimately, the CoO principle under the Directive appears to be a very limited concept which applies only to broadcasting organisations’ own ancillary services containing a very narrow range of content (news and current affairs programmes and broadcasters’ own productions). It would only appear to affect producers working for broadcasters and individual rightholders in the underlying content contained in this narrow range (as well as of course radio programmes including sports content).

Thus, the Directive seems only to address the situation of broadcasting organisations that have their own ancillary services containing almost exclusively their own content though in some cases this will include platforms which have their own channels. Broadcasting organisations may make these services available across the EEA. However, where the broadcaster licenses their own or acquired content to another platform (whether it is a broadcaster or not) for an ancillary service which is not its own, the CoO principle does not seem to apply.

In terms of MCRM, the regime for retransmission rights is extended beyond cable to any retransmission (by satellite, DTT, IPTV, mobile, or internet) of an initial transmission except where the initial transmission is an online transmission (such that Internet originated services are not covered) provided that:

• the retransmission is made by a party other than the initial broadcaster regardless of the way the platform obtains the channel from that broadcaster; and
• the retransmission over the internet takes place in a “managed environment”.

Thus, retransmission services provided over the open internet fall within the scope of the MCRM regime only when they are provided in a managed environment, which, in principle, means that only authorised users can access the service.

The so-called broadcaster veto remains in place. Any rights held by a broadcaster itself (irrespective of whether the rights are its own or have been transferred to it by other rightholders) in respect of their broadcast, including rights in the content of the programmes, are exempted from MCRM for retransmissions. The veto thereby provides flexibility for producers as they are in position to either license their retransmission rights up front to the initial broadcaster or exercise their rights through a collective management organisation (CMO). The approaches taken by producers often vary depending on their size and bargaining power.

As regards DI, which is now defined in the Directive, it is regulated as follows:

• In the case of “pure” DI, where the broadcaster is only using DI to deliver its channels to the platform, the broadcaster and the signal distributor[14] are deemed to be participating in a single act of CTTP for which they both need to obtain authorisation from rightholders (but for which they are not jointly liable). Member States remain free to determine the modalities for obtaining authorisation from rightholders and may also choose to apply MCRM in so far as the clearance of rights by platforms is concerned.
• For “parallel” or “impure” DI, where the broadcaster transmits directly to the public and at the same time uses DI to deliver to other platforms, DI is assimilated to a retransmission and therefore the MCRM regime under the new SatCab Directive and 1993 SatCab Directives will apply respectively.

Beyond the changes to the definition of retransmission and the guidance in Recital 21, there is actually no specific substantive provision on impure DI in the Directive. It appears to be based on the Airfield case.[15] Recent Belgian legislation[16] does not seem to make a distinction between pure and impure DI—given the approach there it is arguably not necessary. At the same time, the Amsterdam Court of Appeal in a judgment pre-dating the trialogue result appears to reject the concept.[17]

While MCRM is discretionary in the case of pure DI, it seems likely Member States will be reluctant to adopt a bifurcated approach to (pure v impure) DI in their national implementing legislation. In practice, therefore, many Member States may elect to apply MCRM for pure as well as for impure DI.

The relationship between AV producers and broadcasters should continue to be relatively straightforward in the context of the latter’s licensing of content for inclusion in their channels from the former. The more complex issue pertains to the broadcasting organisation’s exposure for its participation in the single act of CTTP and the potential for claims by music author CMOs and other CMOs including those representing AV authors especially in Member States where there are statutory remuneration rights for CTTP. The concept of a single act of CTTP sets the stage for renewed claims against both broadcasters and platforms—exclusion of joint liability takes some of the pressure off but does not remove it.

The relations between broadcasters, platforms and CMOs in this space will become increasingly contentious and litigious—this is exacerbated by a lack of clarity and a potential for unintended consequences. At the same time, with the single act of CTTP approach, some broadcasters apparently feel that this shores up their own related rights and that it is useful vis-à-vis the platforms and signal theft (and in Germany, for example, broadcasters also collect rights revenue from a CMO).

National implementation

Transposition is set to be a complex and political process—particularly given that the Directive on Copyright in the DSM[18]  was finalised at the same time.

Although certain provisions appear to leave Member States limited room to manoeuvre, there is always margin for mischief.

The concepts in the Directive relating to the definition of ancillary online services and the CoO principle may be subject to different interpretation in the legal traditions and industry practices of Member States. This could affect important concepts like “own productions”, “managed environments” or moving targets like “catch-up”. With respect to the latter, there is a risk of expanding the notion of “ancillary online service” to other functionalities either inadvertently or by design. While the broadcaster veto was not hard fought during the legislative process, it might be at risk in some Member States—particularly where it is already disrespected (e.g. in Germany). The Member States’ potential approaches to the Directive’s DI provisions will likely be hotly contested by broadcasters, platforms and CMOs. The latter will likely rely on the relative ease of taking a consistent approach to pure and impure DI to encourage Member States to choose to apply MCRM to pure DI in so far as the clearance of rights by platforms is concerned. Member States will likely already be reluctant to adopt a bifurcated approach. Audiovisual author/performer CMOs will likely use the occasion of implementation (in conjunction with implementation of the Copyright in the DSM Directive) to attempt to secure statutory remuneration rights.

[1] See Directive (EU) 2019/789 of the European Parliament and of the Council of 17 April 2019 laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes, and amending Council Directive 93/83 [2019] OJ L130/82 at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L0789&from=EN [Accessed 23 May 2019].

[2] Also referred to as the Broadcaster Directive or the Territoriality Directive.

[3] For more details on modernisation of EU copyright rules see https://ec.europa.eu/digital-single-market/en/modernisation-eu-copyright-rules?utm_source=twitter&utm_medium

=social&utm_content=Digital%20Single%20Market&utm_campaign=copyright [Accessed 18 April 2019].

[4] Proposal for a Regulation of the European Parliament and of the Council laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes, COM/2016/0594 final—2016/0284 (COD) at https://eur-lex.europa.eu

/legal-content/EN/TXT/PDF/?uri=CELEX:52016PC0594&from=EN [Accessed 18 April 2019].

[5] Council Directive 93/83 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission

[1993] OJ L248/15 at https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A31993L0083 [Accessed 18 April 2019].

[6] Case AT.40023 – Cross-Border Access to Pay-TV (Pay-TV Investigation).

[7] Territorial exclusivity serves as the principal source of financing for content production across the EU (in particular, through the pre-sale of territorial rights to broadcasters and other distributors). The Commission’s Proposal coupled with the potential application of competition law threatened to undermine the value of exclusive rights and contractual freedom. While the latter was notionally preserved in a Recital, it was subject to the caveat of compliance with EU law (including competition law) which risked rendering it toothless, notwithstanding the Commission’s promise that the DSM strategy would respect the value of rights in the AV sector (Communication from the Commission, “A Digital Single Market Strategy for Europe Brussels” COM(2015) 192 final p.8). See also, on the downside for consumers, The impact of cross-border access to audiovisual content on EU consumers (Oxera and O&O, May 2016) at https://www.oxera.com/publications/the-impact-of-cross-border-access-to-audiovisual-content-on-eu

-consumers/ [Accessed 18 April 2019].

[8] DI is how the vast majority of broadcasters deliver their content to platforms who in turn distribute to consumers.

[9] On 21 November 2017, the EP JURI committee voted on its position on the PBR and in favour of entering into inter-institutional negotiations on the basis of that position (see http://www.europarl.europa.eu/doceo/document/A-8-2017-0378_EN.html?redirect [Accessed 18 April 2019]). Following an unsuccessful challenge, the position was confirmed by a vote in the EP plenary session on 12 December 2017. On 15 December 2017, the Council adopted its “general approach” (see http://data.consilium.europa.eu/doc/document/ST-15898-2017-INIT/en/pdf [Accessed 18 April 2019]) which was its opening position for trialogue with the EP and the Commission.

[10] There were six trialogues (on 20 February, 13 March, 17 April, 8 October, 28 November and 13 December 2018).

[11] See https://data.consilium.europa.eu/doc/document/ST-5225-2019-INIT/en/pdf [Accessed 18 April 2019].

[12] In order to give Member States the necessary flexibility to implement the provisions on DI.

[13] In addition to Treaty on the Functioning of the European Union (TFEU) art.114 concerning the harmonisation of the internal market, which was the sole legal basis for the PBR, the Directive is based on art.53(1), on the right of establishment, and art.62, on the freedom to provide services.

[14] The term signal distributor is generally used by the Directive in connection with direct injection whereas retransmissions are carried out by retransmission service operators. The distinction seems somewhat artificial.

[15] Airfield v SABAM and AGICOA Belgium (C-431/09 and C-432/09) EU:C:2011:648; [2011] E.C.R. I-9363.

[16] Act of 25 November 2018 amending Book I “Definitions” and Book XI “Intellectual Property” of the Belgian Code of Economic Law.

[17] Ziggo v Lira Amsterdam Court of Appeal, 200.165.671/01 and 200.165.676/01 (13 November 2018).

[18] Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending

Directives 96/9 and 2001/29 [2019] OJ L130/92 at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L0790&from=EN [Accessed 23 May 2019].