European Union: Travelling With Your Online Account In Europe

Last Updated: March 1 2016
Article by Kristina Ehle and Jannis Werner

Last year, we reported on the Commission's strategy to establish a " Digital Single Market" in the EU.

As one of the first concrete steps in that strategy, the European Commission has now introduced its proposal for a Regulation on ensuring the cross-border portability of online content services in the internal market. If passed in its current form, the proposal would weaken the territorial ties of online licensing of copyrighted works by allowing EU consumers to take their content on the road and listen, view or play wherever they are in the EU.

1. Temporary portability of online content services across license territory borders

The Commission's proposed Regulation would allow consumers to access and use online content for which they have acquired a right to use in their home country (e.g., under a perpetual license or a subscription) while temporarily traveling in other EU countries ("Member States"). To achieve this, the proposed Regulation mainly makes three modifications to existing copyright law and copyright contract law in the EU:

  • Right of geographical portability for consumers. Providers of online content services will have to "enable" users who habitually reside in any Member State to access and use that content while temporarily in another Member State (Art. 3(1) of the proposed Regulation), effectively mandating out-of-territory use.
  • Fiction of in-territory use. Such use of online content services while the user is temporarily in a Member State other than their Member State of habitual residence will be deemed to occur in the user's Member State of habitual residence (Art. 4 of the proposed Regulation), so that the content service provider will not need additional licenses from the content owner to provide this portability to its customers.
  • Prohibition of contractual circumvention. Contractual provisions between licensors and licensees of the content that run contrary to the portability rights in Art. 3 of the proposed Regulation or the fiction of in-territory use in Art. 4 of the proposed Regulation will be unenforceable in the entire licensing chain (Art. 5(1) of the proposed Regulation).

2. Which "online content services" are affected?

The proposed Regulation would apply to all "online content services", whether linear or on-demand and independent of the devices and technologies applied for their distribution or use, whose main purpose is to provide access to and use of either:

  • "audiovisual content" (meaning moving images with our without sound as defined in the Audiovisual Media Services Directive); or
  • "works, other protected subject matter or transmissions of broadcasting organizations" (meaning any content subject to copyright or related rights).

This definition is very broad. It includes not only movies, series, recordings and broadcasting of live sports events, concerts and news programs, but also music, games, apps, software and databases offered online.

However, its scope is limited by two carve-outs – that is, areas within which territorial licensing will remain entirely unaffected:

  • Carve-out for free "registration-less" services. The proposed Regulation would only apply to (i) paid online content services and (ii) such free-of-charge online content services where the country of residence of the user is verified. This excludes services that offer registration-less consumption of content (e.g., Flickr or YouTube) from having to offer portability.
  • Carve-out for stationary services. The proposed Regulation would not apply to online content services that are limited to a specific location within the users' state of residence. This would exclude, for example, services that are tied to stationary set-top boxes.

Portable content also will not have to be the same quality as the regular online content service; thus, for example, allowing providers to only give access to SD content instead of HD content to customers travelling abroad. However, Art. 3(3) of the proposed Regulation obliges providers to inform consumers of the quality of the portable service that they receive.

3. How long is "temporary"?

The central question raised by the proposed content portability concept is what exactly makes stays outside the license territory temporary. The proposed Regulation turns the question on its head: Art. 2 sets out the test that consumers will be deemed to be temporarily present in another Member State so long as such Member State is not the Member State where they habitually reside. The issue, therefore, becomes how to determine the "habitual residence" of a given consumer.

The proposed Regulation does not define the term "habitual residence" of consumers. As an EU law term, "habitual residence" in this context will be subject to an interpretation that is autonomous (i.e., formally independent from the Member States' legal terminologies) and homogenous (i.e., the same across the EU). A survey of existing EU legislation shows that the term "habitual residence" is used in the areas of conflict of laws (private international law), international jurisdiction and occasionally in EU public law (notably in social security law), with corresponding case law of the Court of Justice of the EU (CJEU) and guidelines by the Commission. However, these precedents provide slightly different definitions of "habitual residence" depending on the subject matter of the applicable legislation and serve to underscore the difficulties of establishing a person's habitual residence: the definition is usually where the actual center of interests of a person is (i.e., the place where the person is socially integrated); factors such as duration and regularity of stay, place of work, permanence of housing situation, family ties, social activities, and the person's apparent intention are used to determine the habitual residence in these other areas of EU law.

"Habitual residence" is thus hardly a new or unknown concept under EU law; but it is a complicated, substantive, individual standard. The consistent application of a habitual residence test in mass-market retail customer relationships, without any formal guidelines or fallback in the proposed Regulation, might prove to be challenging and will cause significant legal uncertainty.

4. Providers between a rock and a hard place

As the last link in the chain of digital distribution, content service providers will find themselves caught between two conflicting duties.

On the one hand, there will be the new obligation to enable their subscribers' temporary access to, and use of, the content outside the license territory. On the other hand, they will remain obliged to their licensors, ultimately to the content owners, to enable no more access outside their agreed license territory than what the portability rights mandate. In other words, it is the providers who will have to determine their customers' habitual residence and bear the costs and risks of that obligation. It is they who may find themselves in breach of contract either vis-a-vis their customers or vis-a-vis their licensors if they get it wrong. In the latter case, they could theoretically even face enforcement actions for infringement of IP rights by the content owners.

The Commission appears to be aware of this conflict, and to intend to encourage content service providers to err on the side of the consumer. The obligation to enable portability seems designed to be absolute, while the right of content owners to combat abuse is restricted to requiring "use of effective means" where the "required means are reasonable and do not go beyond what is necessary". This limits content service providers' obligation to verify the habitual residence of their customers, but it does not clarify what level of verification is owed.

Quite the opposite: what will be deemed "effective means"? What is reasonable in this context? The IP addresses of temporarily travelling users will not be distinguishable from those of users who permanently reside outside the license territory, so current market-standard processes like real-time geolocation via IP addresses will no longer be viable as the primary – often only – means of license territory verification. Other possible means of residence verification come to mind, like the provision of an address, local means of payment (such as credit card data), a valid form of ID from the license territory, or some combination thereof. But in light of the plethora of criteria considered when establishing an individual's habitual residence in other areas of EU law, the emergence of any simple method of verification seems unlikely.

In the end, it seems that the best approach for content service providers will be to proactively seek contractual settlements of these uncertainties with their respective licensors.

5. The beginning of the end of territorial licensing schemes for content owners?

While the difficulties of individual verification of consumer's state of residence prima facie largely seem to be the content service providers' problem, content owners will also have to adjust to the new portability rights.

From a formal legal standpoint, it may look like content owners have little to fear from the proposed changes. Through its focus on the state of habitual residence of consumers, the proposed Regulation actually confirms rather than negates the current practice of territorial licensing along state borders. By redefining out-of-territory uses within its scope as in-territory, it also ensures that existing territorial exclusivity arrangements remain formally intact. It should be noted, however, that while this proposed Regulation may not fundamentally threaten territorial licensing schemes in the EU, the Commission has stated that it plans to enhance cross-border access – not just portability – in its review of the Satellite and Cable Directive in 2016.

Formal legal effects aside, there are factual implications for territorial licensing that may well cause content owners some concern. With this legal right of EU consumers to access content outside of the license territory, content owners lose the option to require the use of strict and simple "all or nothing" geolocation and the degree of control over their rights that comes with it. Content owners may also need to keep the providers from using the portability rights as an excuse for a race to the bottom with regard to the enforcement of territorial license restrictions, acquiring customers outside their license territories under the guise of temporary travelers.

The primary means to control this would be the content owners' limited right to impose "reasonable" requirements for "effective" means of control. Another avenue may be to contractually limit the quality of content that providers may offer for portability outside their license territory, making abuse less attractive to the consumer. Either way, as with providers, it will be in the best interest of content owners to proactively renegotiate their contractual relationships to avoid uncertainties and include enforceable limitations.

6. Treatment by Non-EU Courts

Another open question in the relationship between content owners and content service providers is how the proposed portability rights will be treated by foreign courts outside the EU in case of legal disputes on the relevant license agreements. It is not hard to imagine a case in which one or more agreements in a distribution chain are subject to the laws and jurisdiction of a U.S. State. While the fiction of in-territory use would probably be qualified as part of the applicable local copyright laws and recognized by non-EU courts under the legal principle of territoriality of copyright, it is much more doubtful whether a U.S. court would apply Art. 5 of the proposed Regulation to deny the enforceability of contractual restrictions on the licensed territory and portability, e.g., in a California law agreement.

7. There will be time to prepare, but not much

As the proposed Regulation is set to apply to existing contracts, the new rules against the enforceability of contractual restrictions through the entire distribution chain will make it necessary for content owners and online service providers to review and, if necessary, adjust their agreements for EU markets.

The current proposal provides for a 6-month grace period between the entry into force of the proposed Regulation and its application in order to provide time for this process. The Commission has stated that the start of application for the proposed Regulation is currently planned to be in early to mid-2017. In the legislative process before that, however, the Council of the EU (representing the Member States' governments) and the European Parliament are likely to weigh in on the matter with their own modifications to the proposed Regulation.

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

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Kristina Ehle
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions