UK: Content Wars: Paywalls, Payments, Pay-As-You-Go, Or Pay At All?

Last Updated: 15 March 2011
Article by Ivor Drake

The latest review of the UK's intellectual property laws announced by David Cameron in November 2010 proposes to "make them fit for the internet age". The review intends to look at a number of different areas, including, the barriers to new internet-based business models (such as, the cost of obtaining permissions from existing rights-holders). The review is scheduled to be completed by April 2011 and may shape the way the digital media industry in the UK develops with respect to the distribution of data, although previous reviews of the UK's intellectual property laws have had a restricted impact on the digital media industry to date.

A recent case highlights the tension between those who publish articles online and those who provide digital media monitoring services, which has put the focus back on the issue of content licensing and payment for digital content.

Meltwater case – A "Battle Royal"

In the case of The Newspaper Licensing Agency Ltd ("NLA") and others v Meltwater Holding BV and others ("Meltwater") [2010] EWHC 3099 (Ch), 26 November 2010, the NLA (an organisation which represents newspapers and collects royalties from newspaper clippings services) and 6 newspaper companies (the "Publishers") sued Meltwater (a digital media monitoring service which sends headlines, article excerpts and hyperlinks to articles in the form of an email to clients (the "Service")) for copyright infringement. This was on the basis that although Meltwater obtained a licence from the NLA to use the copyrighted information the end users of the Service did not have any licence to receive or use such information from the NLA. So the central question to be decided by the court was whether or not the end users of the Service required a licence themselves from the NLA to receive the copyrighted information contained in the Service.

Of particular importance to the NLA and Publishers was that the Service was a commercial operation as opposed to a free digital media monitoring service (such as Google News) some of which have separate arrangements with publishers for the dissemination of copyrighted information contained in news stories.

The NLA claimed that, in the absence of consent from it, the end users of the Service infringe copyright in the Publishers' headlines, and/or the Publishers' articles and/or the Publishers' databases either by:

  1. receiving and reading the Service and in so doing the end user makes a copy of it, and the copyright material contained in it, within the meaning of s.17 Copyright Designs and Patents Act 1988 ("CDPA"). The end user will also be in possession of an infringing copy in the course of business within the meaning of s.23 CDPA;
  2. clicking on a hyperlink contained in the Service to an article, the end user will make a copy of the article within the meaning of s.17 CDPA and will be in possession of an infringing copy in the course of business within the meaning of s.23 CDPA; and
  3. forwarding contents of the Service to clients an end user will issue to the public copies of the works within the meaning of s.18 CDPA.

The court found that when an end user receives an email from the Service a copy is made on the end user's computer and remains there until deleted. Further, when the end user views Meltwater news via Meltwater's website on screen, a copy is made on that computer. As such a licence to Meltwater to provide the Service might give rise to an implied licence to an end user to receive licensed material, but it could not result in an implied licence to make further copies of licensed material. Therefore, without a licence from NLA, the end users of the Service were infringing the Publishers' copyright in receiving the Service.

The court also examined whether the headline of an article could be protected by copyright. Following the ECJ ruling in Infopaq International A/S v Danske Dagblades Forening (Case C 5/08) 16 July 2009 in which it was established that text extracts as short as 11 words could attract the protection of copyright, Mrs Justice Proudman stated that:

"In my opinion headlines are capable of being literary works, whether independently or as part of the articles to which they relate."

She further explained that following the decision in the Infopaq case, the ECJ had made it clear that originality rather than substantiality was the test to be applied to the part extracted. Mrs Justice Proudman rejected the defendants' argument that a headline was part of the newspaper article and formed a single work and found that, based on the facts, the writing of a headline involved considerable skill in order to entice a reader by informing them of the content of the article in an entertaining manner and is therefore capable of attracting copyright protection.

Meltwater is set to appeal the judgment on the grounds that it "reaches a wrong interpretation of the law". Meltwater contends that the judgement means that simply browsing copyright protected content made freely available on the internet will infringe copyright if it is read without a licence. Secondly, using headlines of an article for bibliographic reference could also infringe copyright.

The decision in the Meltwater case runs in parallel with a claim made by Meltwater to the Copyright Tribunal which will rule on the reasonableness of the NLA's licensing terms for digital media content. Meltwater has challenged the NLA licensing scheme on two main grounds, firstly, that Meltwater's end users should not be required to agree to a licence in order to receive email reports containing hyperlinks to a news article, and secondly, that the NLA's licensing scheme (in relation to fee structure and terms) is unreasonable.

So the "Battle Royal" (as described by Mr Howe QC for the NLA and Publishers) between the parties is set to continue into 2011.

Digital Media Content Revenue Streams

Jeff Zucker (President and CEO of NBC Universal) famously said that "we can't trade analogue dollars for digital pennies" in 2008 and this statement was refreshed by Mr Zucker in 2009 when he stated "I think we are at digital dimes now". The statement expresses the view that the traditional media (broadcasters/print) has lost out in terms of a reduction in the number of viewers and advertising revenue, which is not being made up for on the digital side. Given the relative infancy of digital media when compared to traditional media, it is perhaps unsurprising that digital revenues lag behind the revenues of the traditional media. In addition, Mr Zucker's comments do not reflect that the cost of content distribution in the digital media space are reduced by having a low-cost delivery method (i.e. the internet) as opposed to the more costly traditional distribution methods of printing or producing CDs.

Revenue creating options for the receipt of digital media can be boiled down to: (i) subscription fees; (ii) micropayments; and/or (iii) advertising. Subscription and advertising based revenue models are well trodden paths. In terms of micropayments, PayPal suggests that its micropayment transaction rates are designed for businesses that process single purchases under £5, which are useful for digital goods, online gaming, music, media or software downloads1. PayPal has recently launched a micropayment solution for users of various websites (including Facebook) and the growing trend towards micropayments is likely to gather pace in the new year.

Conclusion

In line with the Meltwater case it is likely that digital content owners will become increasingly protective of their digital content both through licensing terms and litigious means as information licensing agencies and online publishers seek to protect their content and extract more revenue from their content.

The ever increasing consumption of digital media, the use of micropayments and the focus on extracting more revenue from digital media is likely to result in an increase in digital revenues, but it remains to be seen whether they will rival the so-called "analogue dollars" for media outlets.

Footnote

1 https://www.paypal-business.co.uk/take-micropayments-with-paypal/index.htm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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