HomeInsightsDigital Single Market and copyright reform – the potential impact on content producers and distributors

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On 6 May 2015, the European Commission is due to adopt a Communication on the Digital Single Market. In advance of the Communication, the College of the European Commission met this week to hold a so-called “orientation debate” on its strategy to achieve a Digital Single Market (DSM) which is one of the current Commission’s top-10 priorities. This note considers the key elements of the DSM, with a focus on the potential impact of copyright reform on content producers and distributors.

The political goals of the European Commission, if translated into law, would mean a major upheaval for the way copyright regulates the content sector in the EU. The Commission is considering measures that would weaken existing exclusive rights protected by EU and international law, severe reductions in contractual freedom, major constraints on the principle of copyright territoriality, and more and stronger exceptions to and limitations on copyright. It appears that the Commission’s main objectives are currently as follows:

weakening the territoriality of copyright to (i) establish “full portability of legally acquired content” and (ii) facilitate “access to cross-border services”;
establishing more and stronger (mandatory) exceptions to achieve “more flexible use of content for specific purposes (e.g. research, education, text and data mining),”; and
to ensure “better enforcement of rights”.
In addition, the Commission is also apparently considering a public consultation on measures related to the hosting safe harbour for online intermediaries established by the E-Commerce Directive. Measures in this area raise very difficult issues and could have important implications, both for commercial negotiations and enforcement efforts.

In respect of the copyright territoriality reform, a particular target for the Commission has been geo-blocking. Vice-President Andrus Ansip has even stated: “I hate geo-blocking”. The Commission is now indicating that it is hostile to all forms of geo-blocking, but it may undertake a public consultation on the matter. Of course, geo-blocking is merely a way of localizing online services and, in practice, it is the technology that drives e-commerce, protects privacy and promotes consumer confidence.

As the Commission goes forward with its DSM Strategy, the content sector must consider the potentially profound impact on financing, licensing and protecting copyright works in the EU. For everyone, from the smallest content platform to the biggest studio, future investment decisions and indeed individual contracts must carefully take into account the potential changes to the current regime – even if they may not be on the books for years. For the European film industry whose business model is constructed on territoriality – indeed pre-sales of rights are used to secure financing before the cameras even begin to roll – the stakes could not be higher, particularly for small and medium sized content enterprises.

Recently, the Commission has begun to recognise that any reform of territoriality must also take into account safeguarding the value of rights in the film sector. As a legal matter, ensuring portability and cross-border access while at the same time protecting the value of rights will be no mean feat. It is difficult to envisage a legislative mechanism to achieve this goal without imposing de facto pan-EU licensing, impacting the entire value chain and potentially complicating enforcement actions.

Content owners who control the necessary rights are, in fact, already in a position to license their content across borders. In doing so, however, they have to confront a range of barriers that are unrelated to copyright legislation, such as the Member States’ differing tax and consumer protection regimes, and more deserving of a place in the DSM Strategy.

It should also be noted that while rightholders do not face copyright impediments to cross-border content licensing, the same cannot be said for enforcement. Legal action to protect that content must proceed on a Member State by Member State basis, requiring considerable resources. At present, few content owners have the resources to effectively enforce copyright infringements on line. In other words, there is no digital single market for enforcement.

Furthermore, while the Commission is also considering improvements to the enforcement regime, there will evidently be less to protect.

The Commission claims its copyright reform will be targeted. However, things will get interesting when its package (whatever it comprises in the end) arrives at the European Parliament. For example, the attitude of the European Parliament toward meaningful legislative improvements to the enforcement regime is questionable (it opposed ACTA, which contained no measures not already present in EU law).

Finally, one must not forget that the Member States play the role of co-legislator. Following the two directives adopted during the last Commission/Parliament, many Member States have signalled that they do not currently wish to see further EU-level copyright legislation. The Council is therefore potentially an important counterbalance.

For more information, please contact our IP Partner Ted Shapiro.