As reported here, the European Parliament recently approved the EU Directive on Copyright in the Digital Single Market (DSM Directive). The DSM Directive has subsequently been approved by the European Council and, following publication in the Official Journal, will come into force. Member States will then have 24 months to transpose the DSM Directive into their national laws.

The transparency obligations are part of a package of measures found in Title IV, Chapter 3 of the DSM Directive which aim to reset relations between the originators of creative content, authors and performers, and the media industry businesses which exploit that content.

Although these provisions have passed largely under the radar so far, they may have much broader and longer-lasting consequences than some of the more controversial provisions of the DSM Directive, like Article 17 (formerly Article 13).

Purpose of the provision

The transparency obligation is designed to arm authors and performers with the necessary ammunition to enforce their new so-called “best-seller” rights under Article 20 – discussed here.

The rationale behind Article 19 is that authors and performers (especially individuals) need information to assess the economic value of the rights they license or assign. Due to a current lack of transparency, and the typically weak bargaining power of authors and performers, so the analysis goes, they are unable to compare the continued economic value of their rights to the remuneration received for the original transfer or licence of them.

Of course, the information itself will be of little comfort, however the intention of the DSM Directive is that, once that information is provided, the author or performer will be able to make an informed decision as to whether to seek additional remuneration pursuant to their new Article 20, best-seller, rights.

Main obligations

Article 19 requires a contracting party receiving rights in protected works (i.e. a licensee/assignee) to provide up to date, relevant and comprehensive information to the authors and performers on the exploitation of their works and performances. This information includes:

  • modes of exploitation;
  • all revenues generated; and
  • the remuneration due on those revenues.

The information must be provided on a regular basis, at least once a year.

Whilst the primary obligation to provide information falls on the direct contracting party, the obligations also extend to sub-licensees, if they are the parties with the relevant information.

Any contractual provision seeking to avoid compliance with the application of Article 19 will be unenforceable.

Potential implications for clients

More tech please

Many, media industry businesses which are used to accounting for royalties for the content they use will already have systems in place which can be used to comply with the transparency right, even if the scope of to whom they have to report may be significantly expanded. A record label, for example, will be used to accounting to featured artists, but it would appear that going forward any performer will be entitled to this information, despite the fact that their rights were acquired on a buy-out basis.

Many copyright-exploiting businesses, for example publishers and broadcasters, do not typically have to account to creators at all at present. For such businesses a significant investment in new technology is likely to be required.

Back catalogues under fire

Existing content is also caught by the new rules; from the date that the Directive comes into effect, in May 2021, all future exploitation will be covered by the rules. This is likely to cause significant practical difficulties. Very significant back catalogues of films, music and other creative works from decades ago continue to be exploited but those who exploit are very unlikely to hold up to date contact details of the authors and performers who contributed to the works.

Unanswered questions

Article 19, like much of the DSM Directive, is a statement of general principles and is lacking in detail as to how those principles should operate. Therefore much of the detail is likely to remain a question of national implementation.

Significantly, Article 19(3) permits Member States to limit the scope of the transparency obligation in situations where compliance would be disproportionate in view of the revenues generated. The scope of any such exemption in each Member State is likely to be the subject of significant debate during the implementation period.

A major unanswered question is whether Article 19 and Article 20 apply to content generated in the course of employment/work for hire. In these situations the transfer of rights typically occurs by operation of law with no additional remuneration payable to the author or performer. Clearly if such content is caught by the DSM Directive the implications would be significant, particularly for employers in the creative sectors.