The EU Parliament's September approval of the proposed EU Copyright Directive (2016/0280) has implications for many companies with interests in digital content, including platforms, news aggregators, rights owners, creators and the press. Widely presented in the media as "breaking the internet", our view is that the proposed law might not make as significant a difference to tech companies as some are suggesting, though it is a further indication of an anti-tech direction of travel among EU law-makers.

The background to this is that, as part of its Digital Single Market strategy, the EU Commission has considered the EU's digital copyright laws and is seeking to shift the balance in favour of rights holders. Among the 200 changes the Parliament voted through, two may be especially important for tech companies: Article 13 (platform liability / upload filters) and Article 11 (new online press publication right). Both have been the source of much debate and lobbying, with an earlier version of the Directive having been voted down in July. The Directive also contains a number of important provisions relating to data mining, revenue sharing, rights of creators, automated image referencing and protection for sports event organisers. Read the consolidated version of the Directive.

Article 13

Why the new law?

Article 13 addresses the liability of certain platforms for content uploaded by users that infringes copyright. Under the existing law, platforms that merely host such content enjoy a safe harbour from copyright infringement on condition that (a) they do not have actual knowledge of the infringement or awareness of facts or circumstances from which the infringement is apparent, and (b) upon obtaining such knowledge or awareness, they promptly remove or disable access to the content (Directive 2000/31/EC).

The exemption only applies to hosting content. Platforms taking an active role, such as optimising or promoting uploaded content, or reviewing content, risk being fixed with knowledge or awareness and losing the benefit of the provision (see L’Oréal v eBay (Case C-324/09)).

This exemption is often cited as the single most valuable law to the technology industry and has enabled a number of platforms to flourish. However, creators and copyright owners have long been lobbying for it to be narrowed, arguing that they are not being fairly remunerated for use of their works (the so-called "value gap" or "transfer of value") and that platforms should take more responsibility for identifying infringing content. They also argue that some platforms are hiding behind the safe-harbour exemption to avoid taking content licences even though they are not mere hosts.

Who does Article 13 apply to?

Article 13 applies to any platform "one of the main purposes of which is to store and give access to… a significant amount of copyright protected works… which the [platform] optimises and promotes for profit-making purposes". A number of platforms have now been specifically excluded from the scope of Article 13, including those providing non-commercial services (such as online encyclopaedia), small-sized enterprises (fewer than 50 employees / turnover not over EUR 10m) and microenterprises (fewer than 10 employees and turnover not over EUR 2m). Furthermore, online market places whose main activity is online retail of physical goods are not caught by the Directive. Notwithstanding these exclusions, most online content sharing service providers of any real size will be caught.

What does Article 13 say?

First, the new law makes clear that platforms caught by Article 13 do not fall within the "safe-harbour" exemption. This was effectively the position under the eBay case but it is now clearer.

Secondly, since those platforms perform an "act of communication" to the public (one of the rights reserved to copyright owners), they themselves are liable for copyright infringement even when the infringement originated from their users. Such platforms must therefore obtain "fair and appropriate" licences from rights holders if they wish to give access to copyright protected content. The Directive proscribes that these licences must cover works uploaded by users (but only where they are used for non-commercial purposes).

Thirdly, where rights holders do not wish to grant licences, affected platforms must "cooperate in good faith" with rights holders to ensure that unauthorised protected works are not made available on the platform (while also ensuring that non-infringing works are not prevented). The previous version of the Directive put this obligation solely on platforms and provided that it could be fulfilled by the use of content recognition technologies. That wording has now been removed and the obligation instead is to "cooperate". However, the effect of "cooperation" is unclear. Guidelines will be issued once the Directive is in force setting out best practice for such "cooperation". There is, however, no indication as to what those guidelines might contain (other than that they must take account of fundamental rights, exceptions to copyright and ensure that the burden on SMEs is appropriate and that automated blocking is avoided).

What isn’t clear?

  • What "optimising" means. Following the eBay case, the safe harbour does not apply if the platform has optimised the specific infringing content in question. In other words, a platform could benefit from the safe harbour for some content but not other content depending on how it has dealt with the specific content. It is unclear whether the same is true under the Directive or whether a platform which performs generalised optimising of content is caught. Furthermore, the EU Parliament’s wording of the current Recital 37(a) of the Directive could reduce the availability of the safe harbour beyond the position following the eBay case: it specifies that “displaying, tagging, curating, sequencing, the uploaded works or other subject-matter, irrespective of the means used therefor” qualifies as an active role such that the safe harbour does not apply.
  • What "cooperation" entails. This is to be decided in yet-to-be-issued guidelines. It seems likely that there will be yet further debate and controversy over the form of the guidelines. The extent of the cooperation obligation will, in part, determine what practical and commercial incentive there is to take a licence to avoid having to cooperate.
  • What is the effect of "cooperation" (or lack thereof) and who will enforce the obligation to license and cooperate? This is unspecified. One possibility is that this is, in effect, a new exception for affected platforms: while they are communicating to the public, they are not liable for infringements if they have "cooperated" with rights holders. However, if this is the intention, it is not made clear.
  • Whether platforms will still have to filter in practice. Critics argue that platforms will have no choice but to use upload filters so as to screen out unlicensed content to try to avoid liability under the Directive (even though the guidelines will say that this should be avoided). This is because platforms are not expressly relieved of liability if they cooperate. While on a strict reading of the Directive some sort of filter is likely to be needed, it is not clear that it would need to be an upload filter. For example, checking content after it has been uploaded could be sufficient to meet the obligations of the Directive. There might also be scope to argue for a more liberal reading of the Directive under which cooperation is sufficient to avoid liability. For many of the larger platforms, this issue might be academic since they already use sophisticated technology to help control infringing content but it may be challenging for other platforms.
  • Impact on smaller platforms. Article 13 now only applies to a narrower range of entities – the larger commercial platforms which optimise and promote content. Concerns that it would hamper start-ups and small enterprises, which would not be able to afford the filtering technology or to handle huge volumes of complaints, have been allayed to some extent but there will be many platforms that the new law does apply to which have not already developed filtering technology. The end result might be that Article 13 actually has little impact on larger platforms and makes operating with or without a licence less commercially attractive for medium sized platforms.
  • Impact on non-infringing content. The Directive states that cooperation between platforms and rights holders should not lead to the non-availability of non-infringing content. The guidelines must also take account of exceptions and limitations to copyright. However, critics point out that exceptions and limitations to copyright vary across member states and that filters are not always able to distinguish between genuine infringements and permitted material. The Directive tries to address this by imposing an obligation on platforms to introduce a complaints procedure for users, as well as obligations on member states to ensure that users have access to an independent body for the resolution of disputes and to the court. Whether these procedures will be enough to ensure that lawful memes and the like are not unduly filtered out, or at least are not filtered out indefinitely, remains to be seen.

What will Article 13 mean in practice?

Though there are, as yet, uncertainties and potential inconsistencies in the proposed law, and much will depend on what the guidelines will say, it seems unlikely that Article 13 will have the sort of dramatic impact suggested in some newspaper headlines. It might make life particularly hard for the medium sized platforms, potentially reducing competition. It might also result in increased filtering. If that happens, we could see a shift in complaints made to platforms from rights holders to end users, with end users trying to persuade platforms to accept content (such as lawful memes) rather than rights holders trying to force them to take down infringing content. At the very least, the new law is likely to alter the balance to some extent in favour of rights owners and mean that platforms cannot simply claim the benefit of the "safe-harbour" and refuse to engage. These platforms will now have to make a commercial decision as to which content, if any, they wish to license from rights holders. It may mean new options for end users to consume content and an increase in paid-for services.

Article 11

Why the new law?

Article 11 gives press publishers the right to ask for licences when online providers copy and share their articles. It developed out of a perceived need to protect the significant investment press publishers make in news, with the EU Commission noting a regression in regional news reporting and a rise in fake news. Critics, however, argue that Article 11 is effectively a “linking tax” even though "mere hyperlinks which are accompanied by individual words" are expressly excluded. They argue that, whilst larger providers might be able to pay to link, smaller ones might not, which could result in a reduction in the number of providers.

What does Article 11 say?

Article 11 states that "Member States shall provide [press publishers with the exclusive rights to reproduce and make available works they publish] so that they may obtain fair and proportionate remuneration for the digital use of their press publications by information society service providers". The right will last for 5 years calculated from the January following publication (reduced from 20 years in the previous draft). It does not have retroactive effect. The practical effect is that those who copy and share content from press publications - such as news aggregators – might now have to obtain a licence to do so. The Directive specifically states that publishers should obtain "fair and proportionate remuneration" which ought to rule out providers requiring licences to be royalty-free.

Who does Article 11 apply to?

All providers of information society services (as defined in Directive 2015/1535) i.e. any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services. A service is provided for remuneration if recipients pay for it or if it is funded by advertising. This is therefore a much broader range of providers than those caught by Article 13.

There are exceptions for private and non-commercial use of press publications by individual users which should allay some fears that it will catch ordinary end users. There is also an exception for the use of "hyperlinks which are accompanied by individual words". The hyper-linking exception has been the source of much debate as to whether it should and does cover the use of news headlines or snippets of news with links. The reference to "individual words" was added to the Parliament's version of the Directive. However, it is not clear how many individual words would be allowed and implies that using the whole title of the press publication is not allowed. Critics argue that it is therefore worse than the original text.

This risk might, in part, be mitigated by the fact that member States must subject the new right to the same exceptions as for copyright, which means that e.g. the quotation exception will apply. However, this still might not be sufficient to allow the sort of hyperlinking to which users of the internet are used.

Importantly, the new copyright does not affect the rights of authors and rights-holders who will not be deprived of their rights to exploit their works independently from the press publications in which they are included. Moreover, Member States must ensure that "authors receive an appropriate share of the additional revenues press publishers receive for the use of a press publication by information society service providers".

What will Article 11 mean in practice?

Again, the precise impact is unclear, particularly as regards hyperlinking. On a strict reading, it will no longer be possible to link to a news article using the headline without obtaining a licence. An attempt to introduce a similar law in Germany has proven to be ineffective in practice but the Commission is hoping that, with the weight of the whole of the EU behind it, Article 11 will not. One of the issues in Germany was that some press publishers accepted royalty-free licences so that their content continued to feature on news aggregator sites. This time, press publisher are likely to be under political pressure to grant royalty bearing licences: if they do not, they might lose legislators' goodwill. This weighs in favour of press publishers trying to enforce their new rights collectively using collective licensing mechanisms similar to the levy systems in some countries. If paid-for licensing does become the norm, we could see a reduction in the number of news aggregator sites.

What else does the Directive cover?

The Directive contains a number of other important provisions relating to data mining, revenue sharing for creators, rights of revocation for authors and performers for non-exploitation of works, automated image referencing services and a new protection for sports event organisers.

What next?

The Directive now goes into trilogue negotiations between the Parliament, Council and Commission. Further amendments are likely given the differences in the three parties' starting positions before a final vote of the EU Parliament (normally a rubber stamp) early next year. On the Parliament's proposal, Member States will then have 24 months to implement the Directive (although the Council's proposal allowed only 12 months).