Summary

Almost two and a half years after the EU Commission proposed a Directive on copyright in the Digital Single Market, the legislative procedure finally hits the homestretch – with the last plenary sessions of the EU Parliament (March 25 - April 18, 2019) marking its likely end (the approval of the EU Council is considered a formality). If the current proposal passes this last hurdle, the following rules would apply, constituting an improvement regarding the feasibility and balance of liability, but restricting exceptions for smaller enterprises and still leaving room for interpretation regarding some of its terms:

  1. Online content sharing service providers that are hosting and optimizing user generated content would be liable for unauthorized use of copyright protected works, unless they (i) had made “best efforts” to obtain a license, and, additionally, (ii) undertook “best efforts” to ensure the unavailability of notified works, and, (iii) acted expeditiously upon notification to remove such content. “Best efforts” will be judged taking principles of proportionality, the size of the service, as well as the availability of suitable and effective technology into account.
  2. Newly established small and medium-sized enterprises with less than 5 million monthly unique visitors would fall under a “softer liability regime” for a maximum of 3 years. Completely excluded from liability under Article 13 would be, for example, B2B cloud services, electronic communications services, online (retail) marketplaces, open source software development and not-for-profit educational platforms.
  3. The online use of press publications, aged up to 2 years, would require obtaining a license from the publisher, except for (i) private and non-commercial uses by individual users, for (ii) hyperlinks, or for (iii) “individual words or very short extracts.”

If the current draft Directive is approved, it will enter into force on the 20th day following its official publication. Member States are then being granted a period of 24 months to implement the Directive’s provisions in national law. If a Member State does not comply with the implementation period, the Directive becomes directly applicable.

General Goals

Ensuring that “consumers and creators can make the most of the digital world” constitutes a crucial key action in the European Commission’s Digital Single Market (DSM) strategy, launched in May 2015. Fundamental disagreements on controversial provisions Article 11 and 13 of the draft Directive, however, resulted in a protracted legislative process (see our Client Alerts on the Directive’s development: “EU Copyright Reform Update - How Far Have We Come?”; “EU Copyright Directive: Spotlight on Upload Filters and Press Publishers’ Copyright”; and “Three Takeaways From the Proposed EU Copyright Directive). Following a Franco‑German compromise on exceptions to an online service’s liability, the latest draft Directive is partly successful in meeting former criticism regarding unclear terms and questions of practical feasibility.

Below, we have summarized the main provisions of the current draft of Articles 11 and 13.

Article 13 – “Online Service Liability” for copyright infringing content

Article 13 subjects online content sharing services to a direct liability for copyright infringing user-generated and user-uploaded content (UGC). Changes to the last draft proposal include clarifications to the scope of the Directive’s applicability and a more balanced liability regime.

  • Definition of subjects: Online content sharing services are defined as

Providers of an information society service whose main or one of the main purposes is to store and give the public access to a large amount of copyright protected works or other protected subject matter uploaded by its users which it organizes and promotes for profit‑making purposes.

Notably, the recitals clarify that Article 13 is only targeted at online services which play an “important role” on the online content market by competing with services such as audio and video streaming services for the same audience. This will exclude enterprises that play a minor role or do not focus on the distribution of copyright protected content. The prerequisite of “large amounts” of copyright protected works shall be assessed on basis of the service’s audience and the number of files uploaded.

  • Liability: Article 13 determines that online content sharing services perform a copyright relevant act whenever they make content available online. The Directive explicitly excludes such acts from the “host provider privilege,” i.e., the exemption from liability originally granted under the E-Commerce Directive. An online content sharing service would therefore be liable for all copyright infringing UGC. The service is only then exempt from such liability, if it can prove that it has complied with the following obligations:
    • License agreements: Online content sharing services shall obtain authorization by all right holders of copyright protected content uploaded by the services’ users. If no license agreement is in place, online services need to be able to evidence that they have made “best efforts” to obtain such authorization. A license granted to the online content sharing service will automatically also cover the work’s utilization by the provider’s users (when they are not acting on a commercial basis or do not generate significant revenues).
    • Upload filter: The online service has to make “best efforts,” in accordance with “high industry standards of professional diligence,” to ensure the unavailability of copyright protected content that it has not acquired a license for. This will likely require the implementation of upload filters. However, this obligation is limited to such content as has prior been notified to the online service by the right holders.
    • Notice-and-takedown: In any case, the online service has to act expeditiously to remove or disable access to the notified content upon receiving a sufficiently substantiated notice by the right holder regarding the online availability of copyright infringing content.
    • Prevention of future uploads: If a case of copyright infringement has been notified to the online service, the online service provider has to make “best efforts” to prevent future uploads of the notified content.
    • “Best efforts”: The draft Directive provides that compliance with the “best efforts” obligations outlined above shall be determined by taking into account (i) the type, the audience, and the size of the service, (ii) the type of works uploaded by the users, and (iii) the availability of suitable and effective means and their costs for the service provider.
  • Further obligations: include a right holder’s right to request information on the cooperation with services as well as a service’s requirement to implement user complaint redress mechanisms.
  • Exemptions: Article 13 of the Directive provides for two different kinds of exemptions. Certain business models are fully excluded from any obligation and liability provided for by Article 13, while newly established small and medium-sized enterprises (only) enjoy a “softer” liability regime.
    • Full exemption: Article 13 completely excludes the following services from its liability provision (regardless of their size, etc.):
      • B2B cloud services,
      • cyberlockers,
      • electronic communications services,
      • online (retail) marketplaces,
      • open source software development and sharing platforms, and
      • not-for-profit educational/scientific repositories as well as online encyclopedias (recital 37a).
    • Exemption in part: Enterprises not falling under the above business categories benefit from a “softer” liability regime if:
      • They have an annual turnover under 10 million Euro,
      • their services have been available to the public in the EU for less than 3 years and
      • they have less than 5 million unique monthly visitors. (Should, within the first 3 years, the average number of monthly visitors exceed 5 million, the enterprise needs to undertake best efforts to prevent further uploads of notified infringing content.)
      • “Softer” Liability regime: If the above requirements are being met by an enterprise, it is not obligated to secure the unavailability of copyright infringing content. It only has to comply with the following obligations to be exempt from liability:
        • It needs to make “best efforts” to obtain a license, and,
        • in absence of such license, it is only subject to regular notice-and-takedown obligations.

Article 11 – Copyright for Press Publishers

Article 11 introduces an ancillary copyright of publishers of press publications concerning the reproduction and making available of press articles or excerpts by information society service providers. The recitals explicitly mention the reuse of press publications by “news aggregators” and “media monitoring services” as the reason for the introduction of Article 11.

  • Scope of application: Article 11 relates to all press publications published after the Directive has entered into force, expressly excluding publications of a scientific or academic purpose as well as blog entries.
  • Exceptions:
    • Individual users: Article 11 excludes private and non-commercial uses carried out by individual users.
    • Hyperlinks + very short extracts: Similarly, hyperlinks and “individual words or very short extracts” shall not be covered by Article 11. This slightly extends the exception’s scope as compared to the EU Parliament’s proposal of “hyperlinks accompanied by individual words.” Considering that the recitals at the same time determine that the use of short extracts may not affect the effectiveness of the press publishers’ right, the exact scope of “short excerpts” will likely present one of the first questions to be decided by the courts.
  • Term of Protection: In contrast to the originally proposed 20 years, the Directive provides for 2 years of protection, to be calculated from the first day of January of the year following the publication.
  • Authors’ share: Authors shall receive an appropriate share of the revenues that press publishers generate from uses covered by Article 11.

Outlook

The draft Directive received the blessing of the EU Council’s committee on February 20, 2019 and the approval of the legal committee of the EU Parliament (JURI) on February 26, 2019. Though the Netherlands, Luxembourg, Poland, Italy, and Finland still oppose the text, France and Germany have joined forces and are pushing strongly for the draft Directive to be executed. While the approval of the members of the EU Council is considered a mere formality, an approval by the member of the EU Parliament is not unlikely, but a final rejection remains within the realms of possibility.