A deep dive into the EU Copyright Directive and its impact on online platforms, right holders and performers

Copyright Directive ('the Directive'), which was subsequently also endorsed by the Council of the European Union on 15 April 2019.The final wording significantly evolved from the European Commission's proposal, after a long battle between the Parliament and the Council of the EU who provided various differing proposals for the text of the Directive. The Directive is part of a wider reform by the EU Commission of copyright in the internet age, within its plans to create a digital single market. So far, its path has been far from smooth. The Directive aims to re-calibrate the balance of current protections in favour of rights holders. Below we provide a more detailed look at the new Directive and its potential impact on online platforms, right holders and performers.

Two controversial provisions: Article 15 and Article 17

Most notably, the Directive includes two highly controversial provisions, Articles 15 and 17, which have been the subject of much debate and campaigning:

Article 15: Ancillary copyright of press publishers

Article 15, formerly Article 11, introduces a new ancillary (or "neighbouring") copyright for EU-established press publishers, separate from the copyright in individual articles. Under Article 15, displaying anything other than "snippets", namely "individual words" or "very short extracts" of content to users via online platforms and other news aggregators, will require a licence. Article 15 has therefore been referred to as "link tax", "news tax" or "publishers’ right", and resembles similar laws that have already been introduced in Germany and Spain. Its underlying rationale is to generate income for (European) press publishers in an attempt to address a perceived "value gap". Campaigners against its introduction argued that it will limit freedom of expression and access to information. Some also fear an increase in the prevalence of "fake news". Article 15 does not tackle waivability of the right by the publishers, which may, however, be considered by the national legislators when implementing the Directive in the EU member states. The final wording of Article 15 raises a number of questions:

  • Defining "Snippets": The use of "individual words or very short extracts" are excluded from the scope of Article 15. In addition, Recital 58 of the Directive distinguishes a "part" of a press publication and "individual words" or "very short extracts". How short are "very short extracts?" How many "individual works" qualify as an exception? Does originality matter? In light of the ambiguous wording, it would appear a matter of time until national courts and the CJEU are called upon to provide clarity.
  • Hyperlinking: the final version of Article 15 excludes hyperlinking. Critics argue that this exception does not change much, as links are often accompanied by a short snippet of preview text from the website displayed under the link. It remains to be seen how Article 15 will affect the established CJEU case law on the legality of hyperlinking, such as Svensson, BestWater, GS Media.
  • Duration: the right will last two years from the press publication and it explicitly provides that the right does not have any retroactive effect. This only applies to press publications published after the Directive enters into force.

Article 17: Content upload filters and requirements to license or prevent illegal materials Equally controversial is Article 17, formerly referred to Article 13, which states that certain service providers are engaged in "an act of communication to the public" in respect of user generated content (UCG) containing copyright protected material. Article 17 contains operative provisions aimed to solve the so-called "value gap" and breaks new ground by establishing primary liability for "online content-sharing service providers" (OCSSPs). Rights holders have argued that this is essential for these services to seek licenses and for rights holders to be fairly remunerated for uses of their works online. Only taking protection measures, as initially suggested by the Commission, was arguably not sufficient. Article 17 also establishes a copyright-specific safe harbour regime and OCSSPs can still escape liability insofar as they satisfy the specific set of obligations set out in Article 17(4).

  • OCSSPs: Not every company which provides Internet based services will be subject to the new regime. Article 2(6) Directive provides that an OCSSP "means a provider of an information society service of which the 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 organises and promotes for profit making purposes". While this definition will include major online music and video steaming platforms or popular social media sites, not-for-profit online encyclopaedias (e.g. Wikipedia), not-for-profit educational and scientific repositories, open-source software developing and sharing platforms (e.g. GitHub), ISPs, online marketplaces (e.g. Amazon), B2B and personal cloud services fall outside the OCSSP definition.
  • Communication to the public: the Directive explicitly states that OCSSPs engage in an act of communication to the public and thus will always be liable for copyright infringement when they give the public access to copyright protected content uploaded by their users. Critics, however, say that it should be up to a court to examine whether there is communication to the public on a case by case basis rather than a blanket statement. The Directive therefore arguably removes the flexibility to adapt to novel circumstances, as the CJEU jurisprudence has done so to date.
  • Licensing Requirement: OCSSPs will have to enter into licenses with rights holders - such as authors, performers and broadcasters - to be able to share copyright protected works on their platform. On the face of it, the proposed licensing requirement is broad; it covers various types of works protected by copyright and related rights. So, will OCSSPS need to seek blanket licenses with every rights holder in the world? Theoretically, yes. However, in practice, this is unworkable. It appears more likely that, when implementing the Directive, members states will provide more specific licensing terms e.g. via collecting societies. In many jurisdictions, different categories of rights holders are represented by several different collecting societies, even for the same work, which means that OCSSPs will have to enter into multiple licenses to cover the rights for the content uploaded by their users.
  • Copyright-specific safe harbour: Article 17(3) clarifies that the hosting defence under Article 14 E-Commerce Directive will not apply to OCSSPs for acts covered by the Directive. OCSSPs may still avoid liability if no authorisation is "granted" by rights holders or, arguably, if it was practically impossible for platforms to identify the rights holders. However, this will only apply provided they have (i) made best efforts to obtain an authorisation; and (ii) made best efforts to ensure the unavailability of works (on the basis of relevant and necessary information provided by rights holders); and (iii) taken down content expeditiously upon a sufficiently substantiated notice by rights holders, and made best efforts to keep it down. A more limited obligation is imposed on OCSSPs that have been available for less than three years and have an annual turnover of less than EUR 10 million, provided the average number of their monthly visitors does not exceed 5 million. On that basis, they are only obliged to make "best efforts" to obtain authorisation and take content down or remove it expeditiously, upon rights holder notice.

Overall, Article 17 results in an effective obligation for those platforms to monitor UCG which is at least arguably contrary to Article 15 of the E-Commerce Directive and established CJEU case law such as (SABAM) v Netlog NV Case C-360/10. Critics fear that Article 17 will require the use of upload filters and could lead to an over-blocking of legitimate content. As has been widely reported in the media, this could also affect the sharing of satirical content and memes where these are based on copyright protected images and so impact freedom of expression. While Article 17 requires "appropriate and proportionate” measures to prevent copyright infringement, the Directive's rapporteur, German MEP Axel Voss has been cited as arguing that Article 17 did not require upload filters as a means of compliance. However, it is hard to avoid the conclusion that the Directive does materially change the current law safe harbour laws in Europe despite the Commission’s position that this was not the intention of the originally proposed provision.

Fair remuneration of performers and authors:

Articles 18 - 23

Crucially, the Directive aims to ensure that authors and rights holders are adequately paid for the use of their content. This harmonizes the previously fragmented legal landscape in the EU. The majority of the Member States currently leave the issue of determining fair remuneration for authors and performers to individual or collective negotiations. Others, such as Spain and Italy, provide that professional users of copyrighted works and other subject matters must pay equitable remuneration to the authors’ and performers’ Collective Management Organizations for each act of utilization of their works. In Poland, equitable remuneration to authors and performers must be paid for certain uses of audio-visual works. German law provides that authors and performers have the right to receive equitable remuneration when they transfer their exclusive rights. The Directive covers the issue of author and performer remuneration in Articles 18-23.

  • Article 18 ("Principle of appropriate and proportionate remuneration"), in particular, affirms the general principle that where authors and performers license or transfer their exclusive rights, they are entitled to receive appropriate and proportionate remuneration. In the implementation of this principle into national law, Member States shall be free to choose the most suitable mechanisms.
  • Article 19 ("Transparency obligation") provides that authors and performers shall have the right to receive, on a regular basis and at least once a year, up to date, relevant and comprehensive information on the exploitation of their works. This right can be enforced against the parties to whom authors and performers have licensed or transferred their rights or against their successors in title (which may expose also sub-licensees to this obligation to provide regular updates to right-holders).
  • Article 20 ("Contract adjustment mechanism") provides that authors and performers or their representatives (including, presumably, their collecting societies) are entitled to claim additional, appropriate and fair remuneration from "the party with whom they entered into a contract for the exploitation of their rights", when the remuneration originally agreed turns out to be disproportionately low compared to all the subsequent relevant revenues derived from the exploitation of the works or performances. This right is enforceable also against “successor in title” of the first assignees or licensee, which may also include sub-licensees and professional users as well (such as TV broadcasters or providers of OTT services).
  • Article 22 ("Right of revocation") provides that, where an author or a performer has licensed or transferred their rights on an exclusive basis, the author or performer may revoke in whole or in part the licence or the transfer where there is a lack of exploitation of his or her work.
  • Although nothing in the Directive expressly provides that these rights are unwaivable, Article 23 states that any contractual provision that prevents compliance with Articles 19, 20 and 21 will be unenforceable.

Outlook

Platforms will now be working to get ahead of the national implementation of the Directive and looking carefully at any changes that will need to be made to their business models in order to protect their revenues. The most significant changes for the platforms will be the requirement to obtain licenses and have content protection measures in place. They will also have to report to collective societies on measures taken in relation to protecting right holders' rights. Not all EU member states are equally supportive of the Directive and some countries - such as Sweden and Poland– have already indicated that they do not agree with the direction of the changes. However, since the Directive will require national implementation, such varying acceptance could potentially lead to a kaleidoscope of digital copyright regimes. The text adopted by the European Parliament has now also been formally endorsed by the Council of the European Union on 15 April 2019 and has therefore cleared its final hurdle. Once published in the Official Journal of the EU, EU Member States will have 24 months to transpose the new rules into their national legislation. If published within the next few weeks, the changes would therefore be effective from June 2021.