Cesare Galli December 11 2017 Collecting societies and the SIAE – another step towards liberalisation IP Law Galli | Intellectual Property - Italy Cesare Galli Intellectual Property IntroductionDecree-Law 148/2017RequirementsContrast with EU rulesCommentIntroductionFor the third time in just a few months, lawmakers have intervened in matters concerning collecting societies and copyright, this time through the implementation of Decree-Law 148/2017 (published in Official Gazette 242 of October 16 2017). This new regulatory amendment further weakens the unjustified monopoly of the Italian copyright collecting agency (the SIAE). However, a number of issues concerning the new wording of Article 180 of the Copyright Law remain, which could result in the retention of inadmissible limitations contrary to EU law and the liberalisation of the market being deferred once again.Decree-Law 148/2017Lawmakers recently tackled the question of collecting societies (ie, societies which conduct services of intermediation in the management of copyright and related rights), which is particularly important from a financial perspective for the music sector. Following an initially timid approach that was limited to related rights (Legislative Decree 35/2017) and broader (but still inadequate) intervention regarding the secondary use of musical works (Legislative Decree 124/2017), the amendments introduced by Decree Law 148/17 have finally (and rightly) ended the SIAE's monopoly. The introduction of legislation through decree laws has become necessary to avoid an infringement procedure being brought against Italy for its determined resistance not to implement fully the EU Directive (2014/26/EU) on collective rights management and multi-territorial licensing of rights in musical works for online uses.However, an examination of the amendments introduced by Decree Law 148/17 shows that liberalisation is only partial at present. Further, new Article 180(1) of the Copyright Law continues to limit the activities of the "intermediary, howsoever they are performed, whether by direct or indirect intervention, mediation, agency or representation and by assignment of the exercise of rights of performance and mechanical and cinematographic reproduction of protected works".Therefore, an exclusive right to carry out such activities is maintained and is no longer allocated solely to the SIAE. This is undoubtedly a step forward towards liberalisation. However, this right is still reserved for the SIAE and "other Collective Management Organisations" as per Legislative Decree 35/2017. Far from opening up this sector of commercial activity to competition, the law still contains great limitations.RequirementsLegislative Decree 35/1207 establishes a series of requirements, the fulfilment of which is subject to examination by the Communications Regulatory Authority. In particular, Article 2 of the legislative decree states that only bodies whose purpose is "solely or mainly, (the) management of copyright or rights related thereto on behalf of more than one holder of such rights, to the collective advantage thereof" and which are "owned or controlled by their own members" or "non-profit making" are admitted.In addition to stating that collective management organisations must be founded and operate on the basis of "objective, transparent and non-discriminatory criteria", Article 8 of Legislative Decree 35/1207 specifies that they can also manage the rights of parties which are not members thereof, provided that "there is a direct legal relationship deriving from the law or from a transfer of rights, from a licence or from any other contractual agreement".The following independent management entities are excluded from access to this market:entities defined under Article 2 of Legislative Decree 35/2017 as being "solely or mainly, (the) management of copyright or rights related thereto on behalf of more than one holder of such rights, to the collective advantage thereof";entities that are:not owned or controlled, directly or indirectly, wholly or in part, by the rights holders; andprofit making.The amendments made to Article 20 of Legislative Decree 35/2017 by Decree-Law 148/2017 establish that such independent management entities may operate in Italy, but only by virtue of representation agreements which comply with the requirements set out in Article 4ff of the legislative decree. This will lead to an inevitable increase in costs.Not only is this discrimination incompatible with the constitutionally guaranteed principle of equality, but it also continues to limit competition in this sector in Italy. These limits are camouflaged by the wording of the rule, which appears to comply with EU guidelines. However, these guidelines have been scotched through referral to Legislative Decree 35/2017, which appears to run counter to the right to competition under EU Directive (2014/26/EU) and is not enough to ward off the risk of an infringement procedure against Italy.If the text of Decree-Law 148/2017 were to be confirmed, it would lead to a partial liberalisation. This would mean a move from a monopoly to an oligopoly (at least on the face of it, as the SIAE would still be the most important, if not the only, player in intermediation), which would continue to exclude the SIAE's potential competitors from the national intermediation market. As a result, the development of competing companies in Italy would be stymied in a promising sector in which private companies have shown that they can operate better than monopolists.Contrast with EU rulesThe contrast with EU rules (in particular Article 56 of the Treaty on the Functioning of the European Union, which approves the principle of the free movement of services) could not be more glaring. This is all the more so, as Recital 15 of EU Directive (2014/26/EU) expressly states that in all EU member states "rights holders should be free to entrust the management of their rights to independent management entities… which differ from collective management organizations, inter alia, because they are not owned or controlled by rights holders", simply prescribing that "to the extent that such independent management entities carry out the same activities as collective management organizations, they should be obliged to provide certain information to the rights holders they represent, collective management organizations, users and the public".Further, the new amendments made to Article 180 of the Copyright Law do not affect the SIAE's monopoly as regards collecting the rights to fair compensation, such as those concerning:the private copying of phonograms and audiovisual works (Article 78bis);reprography (Article 68); andfair compensation in the cinematographic sector (Article 58).Decree-Law 148/2017 made no changes to the SIAE in this regard. This fosters the risk of further and completely unjustified discrimination, as there is no reason to claim that the scope of the new Article 180 of the Copyright Law (which, as previously stated, reduces the SIAE's monopoly concerning copyright matters) should not involve rights to fair compensation, which come within the scope of copyright matters. Thus it appears reasonable to propose a broad interpretation, according to which these activities, regardless of the rule's wording, may be exercised by collective management organisations that meet the legal requirements.CommentThe legislative amendments introduced by Decree-Law 148/2017 appear to be largely inadequate. The lack of openness to competition in copyright intermediation, contrary to the precise (and binding) EU indications, not only exposes Italy to a risk of burdensome infringement procedures before the European Commission, but also heavily affects operators and rights holders in Italy. This aspect was also recently highlighted in Focus on the Liberalization of Copyright issued by the Bruno Leoni Institute. Incomplete liberalisation maintains an anachronistic and unjustified inequality of treatment, which the Antitrust Authority flagged up over one year ago. This is also an obstacle to the free movement of goods and services, which is all the more serious if the increasingly globalised nature of the market is considered.This justifies the Italian courts' disapplication of domestic rules which are incompatible with the clear directions of EU law. Independent management entities will also benefit from the disapplication of rules which allow discrimination against such entities, contrary to EU law. This is consistent with previous case law in relation to the previous wording of Article 180 of the Copyright Law. For example, a decision from the Court of Milan stated that:"There are not, as things stand, sufficient elements to hold that the diffusion of music by Soundreef in Italy is unlawful by virtue of the reserve granted to the SIAE by art. 180 Copyright Law. Nor can it be asserted that the music... managed by Soundreef (a UK independent management entity operating in Italy: writer's note) and diffused by it in Italy in large-scale distribution retail centres and suchlike, must be entrusted to the intermediation of SIAE."Such a claim would clash with the principles of the EU free market and the fundamental principles of free competition.The recently introduced rules are caught in the midstream. It is hoped – although past experience gives little cause for optimism – that when the decree is converted into law, the unresolved questions will finally be properly addressed in order to complete the process of market liberalisation in this sector.For further information on this topic please contact Cesare Galli at IP Law Galli by telephone (+39 02 5412 3094) or email ([email protected]). The IP Law Galli website can be accessed at www.iplawgalli.it.