European Union: Three Takeaways From The Proposed EU Copyright Directive

Copyright reform is a key part of the European Union's program to create a Digital Single Market in the EU. The European Commission's goal is to modernize the entire EU copyright regime to reflect the digital age.

The latest proposal addresses (i) monitoring obligations for online platform providers and (ii) ancillary copyrights for press publishers.

The top three takeaways from the latest proposal are:

  1. If enacted, commercial online content-sharing platforms could be liable for copyright infringement arising from user-uploaded content.
  2. If enacted, online platforms also would be required to pay a license fee to press publishers for publishing snippets beyond mere hyperlinks and a few individual words.
  3. But it's not over yet. The latest proposal likely won't be enacted before the spring of 2019. Ongoing negotiations among the EU Council, EU Commission, and EU Parliament could result in amendments favoring the online platforms.

BACKGROUND

The European Commission launched its Digital Single Market (DSM) strategy in May 2015. The DSM strategy consists of three "pillars" and sixteen "Key Actions." Key Action 6 focuses on a harmonized EU copyright regime.

On September 12, 2018, the EU Parliament sided with content producers and accepted, with minor amendments, a draft proposal that it had rejected just two months earlier. The draft proposal specifically addresses monitoring obligations for platform providers and ancillary copyrights for press publishers.

The legislative body's acceptance of the draft proposal is not particularly surprising. European companies traditionally have been stronger about creating content as opposed to owning distribution channels, and the draft favors content creators over Internet giants and other platform providers.

But the legislative process continues with negotiations among the three main EU institutions. Content owners continue to seek amendments to bridge the so-called "value gap," i.e., that will allow them greater participation in the revenues of the major online platforms.

ANALYSIS

The draft copyright directive addresses two particular areas of controversy:

  • Monitoring Obligations vs. Notice and Takedown Procedures: Under EU law, the general rule has been that host providers are not directly liable for user-generated content (UGC). Instead, they are only required to follow notice and takedown procedures. The E-Commerce Directive does not impose general monitoring obligations for UGC. Rights holders, such as the major music labels, have lobbied strongly in favor of monitoring obligations. Online platforms and institutions like the German Association for the Digital Economy (BVDW), by contrast, have argued that content filters may impede free speech by causing "over-blocking" of permissible content.
  • Press Publishers' Copyright: Spain and Germany have introduced an "ancillary copyright" at the national level with limited success. The ancillary copyright requires online platforms like Google to pay license fees to press publishers for displaying small excerpts or "snippets" of news publications. The impact of this requirement, however, was that Google received no cost licenses from German press publishers and shut down its Spanish Google News service. Opponents argue that applying the ancillary copyright provisions at the EU level would interfere with free speech, harm small publishers and start-up companies, and favor large, U.S.-based online news providers to the detriment of information diversity.

Confirming the controversial nature of these issues, the EU Parliament took the rare step of vetoing its own legal committee's draft of the copyright directive in July 2018. Just two months later and after substantial lobbying efforts from the interested parties, however, the EU Parliament now has agreed to adopt basically the same draft directive.

THE EU PARLIAMENT'S PROPOSAL

Article 13 - Platform Liability for UGC

Article 13 of the draft copyright directive would make qualifying platforms directly liable for copyright infringements caused by UGC published on their platforms.

Qualifying Platforms

While the EU Commission's draft defined qualifying platforms to include service providers "providing access to large amounts of works," the EU Parliament's draft focuses on the requirement that the service providers "optimize" the UGC. "Optimization" refers to the promotion, display, tagging, curating, and sequencing of UGC.

The new definition brings a platform's liability for UGC in line with the developing case law interpreting the E-Commerce Directive. Under existing national case law, a platform qualifies as an "active" host provider if it optimizes UGC. (The European Court of Justice itself has not yet finally determined the criteria for qualifying as an active host provider.) An active host provider may be exposed to liability for direct copyright infringement arising from UGC. By contrast, a non-active host provider is immune from liability under current law applying the E-Commerce Directive.

The EU Parliament's draft further exempts micro-sized, small-sized, and non-commercial enterprises from liability for UGC. Under current EU law, a small-sized company has fewer than 50 people and less than €10 million in annual turnover.

Liability/Monitoring Obligations

The EU Commission's draft introduced the requirement that qualifying host providers proactively monitor UGC. The EU Parliament's draft factually maintains this requirement by deeming all online content sharing service providers to be directly "communicating to the public," i.e., acting in a copyright-relevant way. The effect of this categorization is that a platform is as copyright-relevant as each UGC upload. To avoid liability for copyright infringement, platforms will have to introduce content-recognition technology and enter into comprehensive license agreements. This requirement was not entirely unexpected, as the European Court of Justice has increasingly broadened what qualifies as a direct infringement of copyright.

In a small concession to EU Parliament members worried about hampering free and creative expression, the EU Parliament's draft states that its provisions shall "not prevent the availability of non-infringing content" and shall implement "redress mechanisms" processed by humans.

Article 11 – Copyright for Press Publishers

Article 11 of the EU Commission's original proposal granted remuneration rights to the press for snippets used by online platforms. The EU Parliament's draft similarly grants a copyright to press publishers entitling them to remuneration for the digital reproduction and distribution of press content.

In response to criticism that these rights might impede free speech, the EU Parliament's draft exempts "hyperlinks accompanied by individual words" and legitimates non-commercial use by individual users from this requirement.

Whereas the EU Commission's draft proposed a twenty-year term for a press publisher's copyright, the EU Parliament's draft limits the term to five years. The EU Parliament's draft requires that Member States ensure that authors partake in press publisher's additional revenues.

STAKEHOLDER REACTIONS AND CONCERNS

As industry reactions confirm, the current draft clearly favors the creative industry and press publishers over technology giants and online platforms. The non-profit Mozilla Foundation, for example, described the EU Parliament's vote as "a very sad day for the internet" and as abandoning "key principles on which the internet was built."

While the draft addresses some concerns from opponents, it remains to be seen whether the concessions (e.g., the human redress mechanism to prevent over-blocking) will be effective. It also remains to be seen how broadly the exemption for hyperlinks and "individual words" will be applied.

The requirement of monitoring obligations is consistent with industry practices that increasingly employ such monitoring voluntarily, but it may not actually reduce related litigation. YouTube, for example, already employs technical filters voluntarily. Despite these filters, YouTube has multiple suits pending against it for allegedly infringing UGC.

LOOKING AHEAD

The EU Parliament's proposal now will be submitted to the EU Commission and the EU Council for approval. The differences between the EU Council's and the EU Parliament's proposals suggest the possibility of continued and heated debate on the issues above. Legislators will have to move quickly to gain approval before the upcoming EU Parliament elections, which will take place in May 2019.

DIGITAL SINGLE MARKET

For more information about the Digital Single Market:

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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