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European Commission launches digital single market copyright and communications reform proposals

In a series of announcements, the EU Commission has launched several reform proposals around its idea of a digital single market. Important changes are proposed in particular for copyright and telecoms regulation.

New copyright reform proposals

The European Commission has launched its most wide-ranging, and controversial, package of reforms to the EU copyright regime since it started its Digital Single Market project in late 2015. While the latest proposals had been leaked over the past few weeks, there are number of significant changes made to them in the official version of the reforms published today, 14 September 2016.

Anyone looking for an overarching attempt to recast copyright law or alter the overall balance between rights holders and platforms will be disappointed. Instead, we see issue-specific reforms touching on a number of areas of copyright. What we can expect to see in the next couple of years is a European copyright regime which, from the surface, looks similar to what we currently have but has been amended in significant ways in numerous pockets, of which amongst the most controversial and high-profile will be (i) a new right for press publishers to prevent online uses of their publications; (ii) imposing extra obligations on platforms who seek to rely on the EU’s safe harbour protection; (iii) country of origin rights clearance for broadcasters’ online simulcasting and catch-up; and (iv) measures to improve the position of authors under contracts for the commercialisation of their works.

There are also new proposals about non-commercial text data mining, and those concerning content portability and geo-blocking from earlier this year. The copyright reform project is finally taking shape.

New right for press publishers

Member states will be required to provide “publishers of press publications” with the reproduction and making available to the public rights already provided to authors, performers, film and record producers and broadcasters “for the online use of their press publications”. It is intended to provide press publishers with an additional legal right on which they can rely to secure payment of licence fees from search engines and other intermediaries and aggregators who reproduce or make available their content. The right would last for 20 years from publication. It exists alongside the rights authors and other rightholders already have in the content of the publications. The exceptions in the Copyright Directive apply equally to this right.

A “press publication” is defined to be a “fixation of a collection” of journalistic works. The use of the words “fixation” and “collection” are particularly uncertain. It is very unclear from this definition exactly what the subject matter of this right is intended to be, unlike with the other neighbouring rights, which relate to e.g. specific and separate sound recordings or data files. While it makes sense to talk of a “fixation” of a collection of works in a print publication, that concept seems alien to an online publication which is likely to be constantly changing and isn’t fixed in any meaningful sense other than as a snapshot each time a website is viewed. And it is unclear what the significance of there being a “collection” of works will be when it comes to determine infringement: if an aggregator takes only one work (e.g. one article) or only part of a work (e.g. an extract or the headline), does that act engage the right?

As the possible infringers of this right are not limited to search engine-type services, it is possible that any unlicensed third party online user of a news publication (e.g. of one article) could infringe the right, leading to possible claims from both the owner of the rights in the underlying content (e.g. the author) and the news publisher.

What impact it will have in practice will depend on how the negotiations between publishers and online users go; the Commission believes introducing a Europe-wide right will strengthen publishers’ bargaining powers. But the Commission hasn’t given a view on whether it believes there will be more money available for this licensing or whether it will result in the same money being spread around more rights holders.

Publishers and/or intermediaries may react to the grant of the new right by reducing the amount of accessible content and/or increasing the price of that content. For example, in Germany, the introduction of an equivalent law led some aggregators to stop listing German publications, changing how internet users accessed that content and depriving the publishers of traffic. The result was that many publishers agreed to be listed again but without charge. In Spain, introduction of a similar law led to the closure of services and the relocation of businesses to countries and markets outside the EU.

Changes compared to the leaked version: the beneficiaries of the right are no longer described as “news” publishers; instead they are “press” publishers. This is to reflect the scope of the beneficiaries of the right, which has been expanded to include publishers who “inform or entertain” on topics of “general or special interest”. The right applies to “digital” use, rather than “online” use. This suggests that it will be possible to infringe the right when using press publications in an offline, but still electronic, environment as well online. The Commission has mentioned the impact of GS Media (see our update here) and Svensson by saying that the “protection does not extend to acts of hyperlinking which do not constitute communication to the public.”

Extra obligations on hosting platforms, addressing the “value gap”

The position of intermediaries, such as social networks and UGC platforms, who host content for third parties which infringe copyright has come under serious scrutiny, particularly whether they have an unfair competitive advantage over fully licensed streaming services and whether they pay a “fair” amount for the use of content on their platforms. The Commission had earlier ruled out amending the “safe harbour” defence on which these hosts rely to operate without concluding licence agreements for their entire platforms; the ‘notice and take down’ regime will remain. Instead, the Commission proposes to retain that defence but require those who benefit from it to take “appropriate and proportionate” measures to (i) “ensure the functioning of agreements concluded with rightholders for the use of their works” and (ii) “to prevent the availability” of infringing works identified by rightholders through cooperation with the service providers, measures such as the “use of effective content recognition technologies”.

It is not clear from the wording of the Article whether, by “use of their works”, the Commission intends to suggest that services providers that store and provide to the public access to works (i) infringe copyright by doing so and (ii) do not benefit from the safe harbour defence so need a licence or, instead, that even if they benefit from the safe harbour they must still take measures to conclude a licence. If the former, that would be a significant development in the law because there have not been any CJEU decisions which have come to that conclusion. If the latter, it is unclear what the licence would be for, given it would not be a licence to make otherwise infringing uses. The relevant recital says “In order to ensure the functioning of any licensing agreement”, suggesting, although it is not clear and is less clear than the leaked draft, that a licence will not always be in place, and then says that the “ensuring protection” obligation will apply even when the service provider is eligible for the hosting exemption but is silent on when the licensing obligation will apply.

This constitutes a valiant attempt to balance the competing interests but leaves a substantial amount to be discussed between them in years to come. There is something in it for all sides. Some platforms may believe that they already do what is required by the proposals; rights holders will push for platforms to take more pro-active steps to detect, end and prevent further infringements and to secure licences. Where the impact of this proposal may be felt most keenly is at the smaller end of the platform market: establishing what is proportionate for early-stage platforms could become a key driver of how they set themselves up and will need reconsidering as they grow. The duties on all platforms will presumably evolve as technology, specifically for rights identification, evolves and becomes cheaper so, over time, all sides will be faced with shifting sands and a lack of clear direction from the Directive.

Changes compared to the leaked version: The Commission has made it clearer that the new obligations on platforms apply whether or not they qualify for the hosting liability exemption. On the other hand, they have made it less clear whether or not the service providers will be obliged to take measures to conclude agreements with rightholders regardless of their status as hosts. The Commission has deleted the reference to the Ecommerce Directive prohibition on general obligations to monitor but it is unclear why, as that was helpful clarification.

Clearing rights for TV and radio broadcasters’ online activities

The Commission wants to make it easier for traditional, linear TV and radio broadcasters to license the rights they need for some of their online activities. Currently rights need to be cleared in at least the country of origin and any other countries in which the service is targeted. This is thought to inhibit the growth of pan-EU online TV and radio services and contrasts with the position the EU adopted in the early 1990s for satellite broadcasts, which only need clearing in the country of origin. For what the draft Regulation calls “ancillary online services”, which are online simulcasts and catch-up services, the copyright will only need to be cleared in the country of origin. In principle, therefore, a broadcaster can obtain a single licence from film studios, producers and collecting societies for its ancillary online services which would enable it to make its online services available across the EU. Video on demand services are not covered so will still need country-by-country licensing.

These proposals would create a substantial upheaval in the licensing and monetisation of TV and radio content in the EU. Currently, most TV and film rights are licensed on an exclusive country-by-country basis. For the simulcast and catch-up services which this regulation covers, that will be impossible to achieve using copyright law. It may still be possible to include country-by-country restrictions in contract e.g. preventing access from outside a defined country, although such licensing practices may fall foul of EU competition and free movement laws. Given the online services could reach the whole of the EU, rather than just the people in the broadcasters’ home territory, the rights broadcasters acquire will, overnight, become more valuable so one can expect rights holders to charge more for them, based on the wider available audience.

Measures to improve the position of authors under contracts for the commercialisation of their works**

In a series of measures, the Commission seeks to impose what it sees as a fairer balance when creators (namely authors and performers) are contracting with parties such as publishers. It tries to achieve this balance in two main ways:

  • First there will be a “transparency obligation” which will afford authors a greater right to call for information on the exploitation of the works they have created, how those have been commercially exploited and the revenues which have been generated. This will apply in all situations except where the contribution of the author or performer is “not significant”.
  • Second, authors and performers will be entitled to request additional remuneration from the party they contracted with where the amount they originally agreed to receive was “disproportionately low compared to the subsequent revenues and benefits”. In effect, this would permit authors and performers to re-open contract negotiations if content they have had a hand in does particularly well commercially.

From an English law point of view, the proposal is unusual and new. The current UK approach is broadly based upon the notion of freedom of contract, meaning that parties are free to agree what they want to agree without the law interfering unduly. The idea that negotiations can be re-opened after they have been concluded and the performance of the contract has been completed, will raise concerns that uncertainty will come into many negotiations. In addition it will allow a claim against a party which may itself not have profited from the rights and who had sold them on. Contracts with authors and with parties to whom the rights are passed on will need to be adapted to deal with this.

That the provision can be adapted to is perhaps evidenced by the experiences of Germany and the Netherlands. Both countries have had so called ‘bestseller’ provisions in their copyright laws (Germany for several years, Netherlands since 2015) and the sky seems not to have fallen in. These laws include both transparency obligations and renegotiations of remuneration based on later success.

Communications - European Commission goes gaga for gigabit

Today, the European Commission has presented its long-awaited proposals for reforming telecoms regulation in Europe, with the aim of increasing high-speed broadband for Europeans. At the heart of the proposals are incentives to stimulate investment in fibre for FTTH/FTTB connectivity, promoting investment in free WiFi services and demanding a coordinated approach on the rollout of 5G mobile infrastructure across Europe.

Most interestingly, the new proposals replace the outdated and much-disliked Electronic Communications Code (ECC) and replace it with a new ECC, which aims to stimulate investment by requiring national regulators to call for expressions of interest in rolling out high speed broadband in underserved areas. Importantly, the new ECC looks to cut the regulatory red tape around new investment; for example, operators seeking to invest heavily in a wholesale only model will not be subject to certain regulations, and while they will be required to offer access seekers access to the network on a wholesale level, they will not be required to offer up their retail services – the Commission does remain willing, however, to impose retail remedies where there is evidence of market failure.

OTT players offering similar services to telecoms services will now be subject to certain telecoms regulations; for example, VoIP services using and offering telephone numbers for end user communications will have to adhere to certain regulations such as providing contractual information, number portability and access to 112 services.

From a mobile perspective, the proposals call for a coordinated European 5G commercial launch by 2020; with a view to present a coordinated strategy across the industry to allocate spectrum bands for 5G and run live trials by 2018.

The Commission has also introduced new consumer protection measures, including strengthening rules on number portability and strengthened and updated universal service obligations to focus on access to new basic services such as email, social media, e-services, banking, education and social services. Further, the Commission has introduced an initiative to assist local authorities in offering free public WiFi, including an initial budget of € 120 million to offer such WiFi services by 2019.

The proposals will also see the BEREC’s powers strengthened, as BEREC will have increased responsibilities in helping national regulators adopt the newly proposed reforms.

Taylor Wessing LLP will produce a more detailed update on these telecoms reforms in the coming weeks.

Impact of Brexit

As to the impact of these proposals on the UK post-Brexit, it will all come down to how the timing of these measures interacts with the Article 50 process and to what extent the terms of exit require the UK to adopt EU legislation as a condition to trading with the remainder of the EU. There are considerable areas of uncertainty in these proposals which will continue to affect UK-based tech and media companies regardless of the terms of Brexit, so it will remain very much in their interests to follow their progress closely and to input into the legislative process as much as possible.

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