TMT analysis: In this article first published on Lexis®PSL, Sarah Blair, associate at Bristows LLP, discusses the implications of the new Copyright Directive (the Directive) in the digital single market and how it will work in practice.

What is the current state of play with the Directive?

The Directive is awaiting enactment. The final text of the Directive was approved by the Council of the EU on 15 April 2019. After its signature by the Presidents of each the European Parliament and the Council of the EU, it will be published in the Official Journal of the European Union. Member States will then have two years to transpose the Directive into national laws (unlike regulations which are directly applicable and come into effect immediately upon their entry into force).

What is Article 17 and what must online content sharing service providers do?

Perhaps the most contentious article of the Directive is Article 17—formerly Article 13 in earlier drafts. It provides that certain online platforms—called ‘online content sharing service providers’ (OCSSP)—perform an act of communication to the public or an act of making available to the public when they give access to copyright-protected works or other protected subject matter uploaded by their users. Both are restricted acts which the copyright owner has the exclusive right to do in respect of their work (as per Article 7(1)).

OCSSPs must therefore obtain authorisation from the rightholders to perform these acts, for example, by way of licensing agreement. The recitals to the Directive provide that such license arrangements should be ‘fair and keep a reasonable balance between the parties’ and should provide rightholders with ‘appropriate remuneration’ for the use of their works (as per recital 61).

In the absence of obtaining such authorisation (rightholders are not obliged to licence their content), OCSSPs will be liable for copyright infringement unless they can show that they have taken all of the actions described in Article 17(4). To avoid liability, OCSSPs must show that they:

  • made best efforts to obtain authorisation
  • made, in accordance with high industry standards of professional diligence, best efforts to ensure the unavailability of specific works and other subject matter for which the rightholders have provided the service providers with the relevant and necessary information, and
  • acted expeditiously, upon receiving a sufficiently substantiated notice from the rightholders, to disable access to, or remove from, their websites the notified works or other subject matter, and made best efforts to prevent their future uploads in accordance with the point above

How does an OCSSP know it has done enough under Article 17(4) to avoid infringing copyright?

Article 17(5) provides some elements which must be taken into account when determining whether an OCSSP has complied with its obligations under Article 17(4). These elements are:

  • the type, the audience and the size of the service and the type of works or other subject matter uploaded by the users of that service
  • the availability of suitable and effective means and their cost for service providers

Any considerations must also be in ‘light of the principle of proportionality’.

Pursuant to Article 17(10), the European Commission is also expected to issue guidance on the application of Article 17, in particular regarding cooperation between rightholders and OCSSPs in Article 17(4). This guidance will follow stakeholder dialogues which it is to organise between OCSSPs, rightholders, users’ organisations and other relevant stakeholders. In providing guidance on ‘best practices’, the European Commission is to take ‘special account...of the need to balance fundamental rights and of the use of exceptions and limitations’.

Does Article 17 mean that OCSSPs have to implement filtering mechanisms? What about the safe harbour exceptions?

The final and approved text of Article 17 does not state that OCSSPs must implement filtering mechanisms to remove rightholders’ content from their platforms—in contrast to earlier drafts which explicitly referred to ‘content recognition technologies’. However, there remains some uncertainty as to whether this is required as being ‘best efforts to ensure the unavailability of works’ on their platforms.

This concern is amplified by the removal of the ability to rely on the safe harbour exception provided in Article 14 of the E-Commerce Directive 2000/31/EC. This provides that internet society services are exempt from liability for the information stored by the recipients of its services of which they have no knowledge or control, provided that on the receipt of such knowledge they act expeditiously to remove or disable access to it. Directive 2000/31/EC, art 15 further provides that there is no obligation on them to actively seek facts or circumstances indicating illegal activity, ie there is no general obligation to monitor the content uploaded to their services. Pursuant to Article 17(3), however, the limitation of liability in Directive 2000/31/EC, art 14(1) no longer applies to OCSSPs in situations covered in Article 17.

Concerns therefore arose—and remain—over what is exactly required under Article 17(4) for OCSSPs to avoid liability thereunder—do they need to monitor the content of their users? Article 17(8) suggests not, as Article 17 ‘shall not lead to any general monitoring obligation’.

The European Parliament has sought to assuage such concerns to some degree in a ‘frequently asked questions’ piece released on the date of its adoption of the final text, which provides that:

‘The draft Directive does not specify or list what tools, human resources or infrastructure may be needed to prevent unremunerated material appearing on the site. There is therefore no requirement to upload filters. However, if large platforms do not come up with any innovative solutions, they may end up opting for filters.’

Who is an OCSSP and are there any exceptions?

OCSSPs are defined in Article 2(6) as a:

  • provider of an information society service (ISS)
  • whose main or one of the main purposes is to store and give the public access to a large amount of copyright-protected works uploaded by its users
  • which it organises and promotes for profit-making purposes

Article 17 is intended to ensure that rightholders are remunerated for their content which OCSSPs monetise on their platforms, eg by organising and promoting it. The recitals to the Directive provide that the definition of OCSSPs ‘should target only online services that play an important role in the online content market by competing with other online content services, such as online audio and video streaming services, for the same audiences’ (as per recital 62).

It is helpful to keep the overall objective of Article 17 in mind when considering the various constituent elements of the definition of an OCSSP. For example, while there is no definition for what constitutes a ‘large amount’ of copyright-protected works, the European Commission and the European Parliament have made it clear that Article 17 is aimed at ‘internet giants’ such as Google, YouTube and Facebook. YouTube has over 1.9 billion logged in users every month, watching around 1 billion hours of video daily and according to 2015 statistics, 300 hours of video are uploaded to YouTube every minute. What is not clear, however, is what the lowest level of ‘large’ might be. The Directive simply states in a recital that it must be assessed on a ‘case-by-case’ basis, taking into account a ‘combination of elements’ including the audience of the service and the number of files uploaded. It will be for the courts to provide further guidance on this and the other criteria when cases will no doubt be referred to them.

The Directive does provide that certain platforms are not OCSSPs. These include (being a non-exhaustive list):

  • not-for-profit online encyclopaedias (eg Wikipedia)
  • not-for-profit educational and scientific repositories
  • open source software-developing and sharing platforms (eg GitHub)
  • electronic communication service providers
  • online marketplaces (eg Ebay)
  • business-to-business cloud services (eg Microsoft OneDrive)
  • cloud services that allow users to upload content for their own use (eg Apple’s iCloud)

What about Article 17 and start-ups?

To try and shield start-ups from any negative effects of the obligations imposed by Article 17, for example the costs of implementing the measures in Article 17(4), the Directive provides that ‘new’ OCSSPs will benefit from reduced obligations. These include OCSSPs whose services have been available in the EU for less than three years, and which have an annual turnover below €10m. They need only show that they have complied with Article 17(4)(a) and that they have acted expeditiously, upon receiving a sufficiently substantiated notice, to disable access to the notified works or other subject matter or to remove these works or other subject matter from their website (as per Article 17(6)).

Where the average number of monthly unique visitors exceeds 5 million, based on calculation of visitors for the previous year, they must also show that they have made best efforts to prevent further uploads of the notified works (as per Article 17(6)).

What will be the impact of Article 17, particularly on those providing user generated content to platforms?

Platforms should consider whether they fall within the definition of OCSSPs and what actions they might need to take so as to avoid falling foul of Article 17.

The European Commission intends the main impact of Article 17 to be increased remuneration for rightholders, by incentivising OCSSPs to conclude licensing agreements so as to avoid being pursued for copyright infringement. As to what impact the obligations in Article 17(4) will have on OCSSPs, this is likely to be determined by the courts when cases are inevitably brought before them to determine the extent of those obligations and how onerous ‘best efforts’ are interpreted to be.

As for its impact on users, Article 17(2) provides that where licensing arrangements are put in place with OCSSPs, that authorisation will cover any acts carried out by the user, provided that they are not acting on a commercial basis or where their activity does not generate significant revenue. Article 17 does not, however, impose any new liabilities or obligations on users.

Many are concerned that Article 17 will result in an increase of content being taken down (whether or not automatic filtering technologies are implemented) and will dampen freedom of speech. In an attempt to counter these concerns, the Directive provides:

  • that all Member States must provide exceptions for quotation, criticism and review, and use for the purpose of caricature, parody or pastiche
  • that OCSSPs must implement mechanisms for users to dispute a take-down

The success of these measures may depend on whether users are willing to expend time and effort to dispute a removal.

What is Article 15 and what does it mean for publishers and online service providers who decide to republish protected works?

Article 15 (formerly 11) provides publishers of press publications established in a Member State with rights in relation to the online use of their press publications by internet society service providers (ISSPs). These rights include those to prohibit third parties from:

  • reproducing their publications
  • making them available to the public without permission

ISSPs will therefore need to conclude licensing agreements with publishers for the use of the works. If they do not, they can be pursued by publishers for copyright infringement.

The publishers’ rights are intended to strengthen publishers’ bargaining positions when they negotiate with online services making use of and monetising their content, for example, news aggregators such as Google News. An ‘appropriate share’ of the remuneration derived from the publishers’ right must also flow back to the authors of the works incorporated in the press publication (as per Article 15(5)).

The publishers’ right is limited in three ways:

  • it applies only to publishers of ’press publications’—mainly literary works of a journalistic nature which are intended to provide the public with information relating to news or other topics. It does not extend to scientific and academic journals or anything which isn’t published under the initiative, editorial responsibility and control of a service provider (Article 2(4))
  • it does not apply to private or non-commercial uses of press publications by individual users (Article 15(1)). Sharing content on social media, for example, will still be permitted
  • it does not extend to hyperlinking or to the use of individual words or ‘very short extracts’ of a press publication (Article 15(1))—however, it should be noted that Article 15 should not prevent rightholders of works (who are not publishers of press publications) from pursuing an ISSP for infringement consequent to the use of a ‘short extract’, following the decision in Infopaq International A/S v Danske Dagblades Case C-5/08 where the European Court of Justice decided that copyright can subsist in extracts of newspaper articles comprising of just 11 words
  • the duration of the publishers’ right is very short, in copyright terms, being just two years from 1 January of the year after the press publication is published (Article 15(4))

What are the key articles in the remainder of the Directive?

The Directive was first introduced in 2016 by the European Commission as part of its digital single market (DSM) strategy to ‘bring down barriers to unlock online opportunities’. As part of this strategy, the Commission explored how EU copyright rules might be modernised for the digital age.

The Directive is split into four chapters, Article 15 and 17 being found in Title IV of the Directive, being ‘measures to achieve a well-functioning marketplace for copyright’. The other articles in this chapter provide for:

  • ‘appropriate and proportionate remuneration’ to authors and performers—Articles 18 to 22 provide that where authors and performers have licensed or transferred their exclusive rights for the exploitation of their works, they are entitled to receive an appropriate and proportionate remuneration (unless the work is a computer program, which is specifically excluded under Article 23(2)). To help ensure this, Article 19 provides for transparency obligations on the parties to whom their works are licensed, requiring that they provide comprehensive information on the exploitation of the works, at least once a year, including the modes of exploitation and all revenues generated and remuneration due. If the remuneration originally agreed turns out to be ‘disproportionately low’ compared to the revenues generated, Article 20 provides for a contract adjustment mechanism, to ensure that authors and performers can claim ‘additional, appropriate and fair remuneration’. If, on the other hand, there is a ‘lack of exploitation’, Article 22 provides that author or performer may, after a reasonable time and upon appropriate notices and deadlines, revoke in whole or part the license or transfer of rights. Any contractual provision which operates to remove the rights under Articles 19 and 20 will be unenforceable unless part of a collective bargaining agreement

Title II to the Directive includes ‘measures to adapt exceptions and limitations to the digital and cross-border environment’. These include:

  • text and data mining exceptions- Articles 3 and 4 of the Directive provide two mandatory exceptions which limit the liability for copyright infringement where reproductions and extractions are made in order to carry out text and data mining, providing that the party relying on the exception has lawful access. Article 3 provides this exception to non-profit research organisations and cultural heritage institutions carrying out such mining for the purposes of scientific research. Article 4 provides a similar exception for commercial entities. A key difference between the two exceptions, however, is that the commercial exception (Article 4) is severely handicapped as rightholders are able to reserve the rights in respect of the use of their works. They are not able to do the same in respect of Article 3 as against non-profit research organisations and cultural heritage institutions. If rightholders choose to reserve their rights, the impact of the exceptions may be very limited given that many entities conducting such mining are for profit, or are not-for-profit but who receive funding on the basis that they find a way to monetise their research
  • wider opportunities to use copyright material for education, research and preservation of cultural heritage—the European Commission has explained that the exceptions to copyright infringement have been ‘modernised and adapted to the technological change, to allow uses online and across borders’. Article 5 provides an exception for the digital use of works and other subject matter for the sole purpose of illustration for teaching taking place under the responsibility of an educational establishment. However, Member States may choose to provide that this exception does not apply to material primarily intended for the educational market or is sheet music (to the extent that suitable licenses are available). Article 6 allows cultural heritage institutions to make copies of any works that are permanently in their collections for the purposes of preservation of such works or other subject matter and to the extent necessary for such preservation

Title III to the Directive is titled: ‘measures to improve licensing practices and ensure wider access to content’. This includes:

  • out-of-commerce works—Articles 8 to 11 concern the use of ‘out of commerce’ works and are intended to ‘facilitate the digitalisation and dissemination of works that are out of commerce’. A work is ‘out of commerce’ when ‘it can be presumed in good faith that the whole work or other subject matter is not available to the public through customary channels of commerce, after a reasonable effort has been made to determine whether it is available to the public’. The Directive intends to incentivise collective management organisations to offer licences to cultural heritage institutions for the use of out-of-commerce works in their permanent collections for non-commercial purposes provided certain conditions are met and the rightholder hasn’t excluded their work from the licensing mechanism
  • collective licensing—subject to certain safeguards, Article 12 provides that Member States may provide for a licensing mechanism to extend licensing arrangements with collective management organisations to the rights of rightholders who have not authorised that collective management organisation to represent them by way of assignment, licence or any other contractual arrangement, or, with respect to such an agreement, the organisation has a legal mandate or is presumed to represent rightholders who have not authorise the organisation accordingly. Safeguards include, for example, that rightholders are guaranteed equal treatment and can, at any time, easily and effectively exclude their works from the licensing mechanism
  • access to and availability of audiovisual works on video-on-demand platforms and visual art—Articles 13 provides that Member States must provide a negotiation mechanism for when parties face difficulties related to the licensing of rights in relation to making available audiovisual works on video-on-demand services. The impartial body must provide assistance to the parties with their negotiations. Article 14 concerns works of visual art, and, as the European Commission has explained, is intended to ensure that ‘all users are able to circulate online with full legal certainty copies of works of art that are in the public domain. Where the term of protection of a visual art work has expired, any material resulting from an act of reproduction of that work is not subject to copyright, unless that act of reproduction is original in the sense that it is the author’s own intellectual creation. Recital 53 explains that this is to harmonise the position across Member States, clarifying that certain reproductions of works of visual arts in the public domain should not be protected by copyright or related rights. It also states that Article 14 should not prevent cultural heritage institutions from selling reproductions, such as postcards

What will happen next with the Directive and how will Brexit impact its implementation?

The text of the Directive has been approved and is awaiting enactment. Once it has been published in the Official Journal of the European Union, Member States will have two years to implement the objectives of the Directive into national laws.

Whether the UK will need to implement the Directive will depend on when it leaves the EU and what deal may (or may not) be arrived at. The UK supported the Directive in the final vote on the Directive before the Council of the EU, but, if it is not required to implement the Directive, it could decide to take a different position on any or all of the Directive’s articles.