Proposed Directive on Copyright in the Digital Single Market—the Value Gap

This article was first published on Lexis®PSL IP & IT on 11 July 2018.

TMT analysis: After a long effort to reach consensus and multiple postponements of the vote, on 20 June 2018 the European Parliament’s Legal Affairs Committee finally voted on its position on the Proposed Directive on Copyright in the Digital Single Market (the Proposed Directive). It also voted to grant the Rapporteur on the file, MEP Axel Voss, a mandate to enter into inter- institutional negotiations on the basis of this position.

Ordinarily, this would suffice for Parliament to enter the inter-institutional negotiations, or, the so-called trilogue. However, on 5 July 2018 the plenary of the European Parliament rejected the Committee’s mandate. As a result, the plenary of Parliament will now consider the Committee’s Report in September 2018.

Sunniva Hansson, associate in Wiggin’s intellectual property group, briefly sets out the background to the Proposed Directive, before considering the report and specifically its position on the so-called ‘value gap’—ultimately setting out the next steps for the Proposed Directive.

Background

The ordinary legislative procedure involves the European Commission submitting a proposal to the Council of the European Union and the European Parliament. Each of the two co-legislators will then consider the proposal in parallel and arrive at their own internal positions, before entering into inter-institutional negotiations. Once an agreement is reached and the positions are reconciled the text must be approved by the plenary of the European Parliament and then by the Council before it can be finally promulgated.

In the case of the Proposed Directive, the Commission’s proposal was published in September 2016, with the Council reaching its internal position—the General Approach—in May 2018. In order for the negotiations to commence, Parliament must now reach its position.

The Commission’s Proposal

The sprawling proposal for a Directive on Copyright in the Digital Single Market was published by the European Commission on 16 September 2016. It is a wildly ambitious instrument, aiming to harmonise EU copyright law in a number of areas, including new mandatory exceptions, related rights for press publishers and remuneration for authors and performers.

The Commission’s proposal on the so-called value gap attracted particular attention. The Commission’s proposal recognised the value gap as follows:

‘Online services providing access to copyright protected content uploaded by their users without the involvement of right holders have flourished and have become main sources of access to content online. This affects rightholders’ possibilities to determine whether, and under which conditions, their work and other subject-matter are used as well as their possibilities to get an appropriate remuneration for it’.

In order to address this state of affairs, Article 13 of the Commission’s proposal would require certain platforms either to take measures to ensure the functioning of licensing agreements or to prevent the availability on their services of unauthorised copyright content identified by rightholders. The Commission’s text refers to the use of content recognition technologies as a potential means of satisfying this duty.

In addition to general EU law principles on proportionality, Article 13 itself requires the measures in question to be appropriate and proportionate.

Article 13, with its accompanying recitals, touches on two sensitive subjects:

  • the communication to the public right in Article 3 of the Copyright Directive (2001/29/EC)—the key right for exploitation of content in the digital environment
  • the safe harbour (or liability privilege) for hosting activities in Article 14 of the E-Commerce Directive (2001/31/EC)

The Legal Affairs Committee Report

The Report’s value gap provision retains a duty on the platforms that fall within the scope of the Directive, to take measures to prevent the availability of infringing works on their services and it specifies that these platforms are not eligible for the hosting liability privilege. Indeed, certain obligations remain in place even where a platform does qualify for the hosting privilege.

It should be noted that the liability regime for platforms which fall outside of the scope of the Directive continues to be governed by the current regime.

Which platforms?

Article 13 applies to online content sharing service providers (OCSSPs). These are defined in Article 2(4a) as information society service providers one of the main purposes of which is to store and give the public access to a large amount of works uploaded by its users, which the OCSSP ‘optimises’.

Per Recital 37a, optimise means, among other thing: ’promoting, displaying, tagging, curating, sequencing the uploaded works or other subject-matter, irrespective of the means used therefore and therefore act in an active way.’ In other words, these are platforms playing an active role in curating user-uploaded content.

The second paragraph of the definition excludes from the definition services acting in a non-commercial purpose and provides a number of examples, including ‘providers of cloud services for individual use which do not provide direct access to the public’.

Communication to the public

Article 13(-1a) provides that OCSSPs communicate to the public. This is stated to be ‘[w]ithout prejudice of Art. 3(1) and (2) of the Directive 2001/29/EC.’ While the drafting may not be abundantly clear, this appears to be intended to preserve the law on communication to the public under those provisions.

The Duties

The primary duty of the OCSSPs is framed as one of concluding ‘fair and appropriate’ licensing agreements with rightholders, unless the rightholders do not wish to do so.

This appears to be an unnecessary duty to impose, given that the nature of copyright is that rightholders must authorise activity which implicates their rights. In other words, once it is determined that a person communicates to the public, that person must obtain requisite authorisation from the rightholders (unless, of course, an exception or a liability privilege applies).

The licensing agreements ‘shall cover the liability for works uploaded by the users’.

By way of secondary duty, OCSSPs must take appropriate and proportionate measures to ensure the functioning of licensing agreements. In the absence of licensing agreements, OCSSPs are to

take measures leading to the ‘non-availability’ of copyright infringing works. These measures are to be taken in co-operation with rightholders.

Liability Privileges

Recital 38 stipulates that OCSSPs communicate to the public and as such cannot benefit from the Article 14 of Directive (2001/31/EC) hosting liability limitation.

Measures and Reporting

In terms of the measures OCSSPs are to take, Recital 39 provides further guidance, as follows:

  • rightholders should provide the relevant information to online content sharing service providers to allow them to identify their content when applying the measures
  • the measures taken must not consist of general monitoring in contravention of Article 15 of Directive (2001/31/EC)
  • when assessing the proportionality and effectiveness of the measures, ‘technological constraints and limitations as well as the amount or the type of works or other subject matter uploaded by the users of the services should be taken into due consideration’
  • measures are to strike a balance between users’ and rightholders’ fundamental rights

Additionally, the report imposes certain reporting obligations on OCSSPs, whereby they are to be ‘transparent towards rightholders and shall inform rightholders of the measures employed, their implementation, as well as when relevant, shall periodically report on the use of the works and other subject-matter’.

This is obviously helpful in that it enables all stakeholders to assess the efficacy of measures applied.

Complaints mechanism

The OCSSPs must put in place effective and expeditious complaint and redress mechanisms, specified to be for the purpose of preventing ‘misuses or limitations in the exercise of exceptions and limitations to copyright law’. Complaints are to be processed without undue delay and rightholders should reasonably justify their decisions. Users must also have access to a court or judicial authority to assert use under an exception. This potentially elevates exceptions to the status of rights.

Why the opposition to the report?

To say that the Legal Affairs Committee report was controversial is an understatement. Large internet platforms, aided by grassroots internet activists, many of which they fund, vehemently opposed it and, in particular, Article 13. Hashtags suggesting the internet needed to be saved were bandied about, though the opposition appears more related to the fact that the value gap proposal would have given rightholders more leverage in their dealings with platforms.

Indeed, the reason for the controversy appears more political than strictly legal, given that the report’s value gap provision would not have moved much beyond the status quo.

Thus, in terms of communication to the public, the Court of Justice has in a line of judgments recognised that certain interventions by platforms which serve to make available works to the platform’s users made with full knowledge of the consequences of those interventions can constitute a communication to the public. In particular, in the Pirate Bay case (Stichting Brein v Ziggo BV, XS4ALL Internet BV, Case C-610/15), the Court of Justice held that the operators of an online platform can be liable for unauthorised acts of communication to the public even where the works in question are placed online by the users of the platform.

In terms of the hosting safe harbour (a liability limitation, not a defence), it is available only to passive platforms which conduct themselves as diligent economic operators and only in respect third party infringements. Thus a service provider which does not at least take some measures serving to prevent the availability of infringing works on its platform would not be able to avail itself of the safe harbour and could be held liable for copyright infringement. In cases where the service provider can be said to infringe the making available right, it needs either an authorisation from the relevant rightholder or to remove infringing works and prevent them from reappearing on its platform.

In short, the report’s Article 13 would not have been so very different from the status quo although in some respects it would have introduced concepts that are alien to copyright law. Why legislate then? That is a good question and perhaps legislation is not necessary. However, some rightholders took the view that the national courts in many Member States have not correctly applied EU legislation and Court of Justice case law. These rightholders perceived their bargaining power vis-à-vis large platforms to be far inferior and considered that a statutory recognition of the status quo would provide them with more leverage.

Next steps

The challenge to the Legal Affairs Committee’s report and mandate was made pursuant to Rule 69c of the Parliament’s Rules of Procedure. The rule specifies that if 10% of the Members of the European Parliament so demand, a vote is to be held. If a majority support that challenge, the file is remitted for consideration at the next plenary.

As such, the report will be considered at the European Parliament plenary in September 2018. Amendments to the report may be filed before 5 September 2018 and undoubtedly there will be considerable political activity taking place before then. In September any course of action is open to the plenary—it can confirm the mandate as proposed by Legal Affairs Committee, amend it or reject it. It could also decide to refer the task back to the Legal Affairs Committee.

One thing is clear, until Parliament arrives at a position, the trilogue cannot commence and the file stalls. The last Parliament plenary is scheduled for April 2019 and, with some exceptions, any unfinished business at that time is deemed to have ‘lapsed’. The 5 July 2018 vote has certainly increased the risk of this piece of draft legislation not being finished before then.

Interviewed by Max Aitchison.