Introduction
Last year, we set out some of the most significant and controversial aspects of the European Commission’s proposal for a new Directive on Copyright in the Digital Single Market (‘Proposal’). Since last September, stakeholders from all points on the policy spectrum have been engaged in intensive lobbying campaigns in an effort to influence the final shape of the Directive and ensure their business interests are not compromised. Almost one thousand opinions and draft amendments to the Proposal have been submitted from European Parliament Committees, including JURI, CULT, ITRE and IMCO, often reflecting the desires and concerns of certain pressure groups that have been engaging with them. With the final vote by the leading Committee1 fast approaching,2 stakeholders are preparing their sharpest arguments, which reveal a deep divide between them about how best to shape copyright laws fit for a continent in the digital age.
Reed Smith has been following the latest developments emanating from Brussels. Whilst the most vehemently debated issues remain the creation of filtering obligations for UGC platforms (Article 13), the creation of a new ancillary right for press publishers (Article 11), and the regulation of text and data mining when applied to copyright-protected content (Article 3), a more recent addition to the debate concerning the remuneration of authors and performers came as a surprise to many observers.
Background to fair remuneration
On 11 July 2017, two Committees in the European Parliament voted on their final Opinions on the Proposal: the Committee on Culture and Education (CULT) and the Committee on Industry, Research and Energy (ITRE).
Both Committees decided to include in their respective opinions a controversial proposition, supported and lobbied for by the Fair Internet Coalition (the ‘Coalition’), a group comprising 4 bodies representing film, TV, music performers and their Collective Management Organisations (CMOs): AEPO ARTIS (representing 36 European performers CMOs), EURO FIA (European Branch of the International Federation of Actors), FIM (International Federation of Musicians), and the IAO (International [featured] Artist Organisation).
The proposition, largely inspired by the Spanish statutory equitable remuneration right3, seeks to create a mechanism whereby the right of making available to the public (as defined by Directive 2001-29) of both authors and performers would become associated with the inalienable and unwaivable right to obtain ‘fair remuneration,’ administered by Collective Management Organisations (CMOs) and collected from Information Society Service Providers (ISSPs) i.e. digital services making works available to the public . The proposal put forward by ITRE reads as follows:
Amendment 55
Article 14 a (new) Unwaivable right to fair remuneration for authors and performers
- Member States shall ensure that when authors and performers transfer or assign their right of making available to the public, they retain the right to obtain a fair remuneration derived from the exploitation of their work.
- The right of an author or performer to obtain a fair remuneration for the making available of their work is inalienable and cannot be waived.
- The administration of this right to fair remuneration for the making available of an authors’ or performers’ work shall be entrusted to their collective management organisations, unless other collective agreements, including voluntary collective management agreements, guarantee such remuneration to authors, audio-visual authors and performers for their making available right.
- Collective management organisations shall collect the fair remuneration from information society services making works available to the public.
From a legal point of view, this proposal raises a significant number of questions, some of which may well seal the fate of this amendment before the next parliamentary session. However, understanding the narrative that this proposal builds upon is equally interesting.
How would it work?
The text fails to give a definition of ‘fair remuneration,’ but it bears some striking resemblances with another mechanism under EU law: the right to obtain ‘equitable remuneration’ for the rental of a phonogram or a film as provided for by Article 54 of the Rental/Lending Directive adopted in 1992.
As per the terms of Article 5, the exercising of the rental right of an author or a performer assigned to a producer gives rise to the payment of an equitable remuneration, collected and distributed by CMOs.
In practice, this provision has had two main consequences: it replaced the remuneration that would have otherwise been owed to the creator under the provisions of its individual contract with a film or record producer; where the remuneration didn’t exist, it created a new revenue stream for performers, administered by CMOs.
By contrast, in Spain, most view the right to obtain statutory equitable remuneration from the ISSPs in relation to the exercising of the making available right as a “top-up,” a complement to the remuneration otherwise owed to the creators under the provisions of their contracts. Indeed, whilst the rental right introduced by the EU Rental/Lending Directive governs the entirety of the act of renting, the exploitation of content online generally triggers different sets of rights. A music stream, for example, is considered by rights holders as a combination of, on the one hand, an act of reproduction and, on the other hand, an act of communication or making available to the public. What proportion of a stream is considered reproduction and what proportion is considered making available or communication to the public varies throughout Europe, depending on which country or which category of rights holder is concerned. However, attempts by rights holders across Europe to limit the impact of such fragmentation by offering digital licences covering all three aspects of the rights involved remains a constant.
At a time where certain observers and stakeholders are questioning the relevance and the adequacy of such fragmentation and advocating for a more drastic recasting of copyright laws to reflect the way content is disseminated online, the Coalition seems to be willing, on the contrary, to embrace it; their campaign material suggesting that “it [the remuneration] would be paid independent of and in addition to any contractual payments that are made by producers in respect of performers’ exclusive making available rights.”
But whether this provision would actually achieve this aim from a legal perspective is debatable. As we see it, three situations must be considered: i) where creators of existing works are paid royalties; ii) where creators of existing works are compensated on a ‘flat-fee’ basis; and iii) where creators are to produce works in the future.
i) For existing works and creators who are compensated on a ‘flat-fee’ basis (session musicians, supporting actors as opposed to featured artists or leading roles) this ‘fair remuneration’ mechanism would undoubtedly improve their situation. This amendment is evidently intended to create the right to a proportional share of the revenues generated for each creator who participated in a piece of copyright protected content, exploited digitally.
ii) For existing works and creators to whom royalties are paid, the mechanism would have to interface with existing contractual provisions (including those relating to remuneration). Again, we see two situations unfolding: on the one hand, in contracts where the event of remuneration becoming governed by a legal compulsory mechanism has been stipulated, the creator would most likely lose its right to claim royalties under the contract (its CMOS becoming its sole debtor in relation to this payment); on the other hand, in contracts where the event has not been stipulated, the question would most likely revolve around whether the assignee is entitled to deduct monies paid by CMOs from the payment owed to the creator with regards the same. In both scenarios, determining what percentage of a digital use is ‘making available’ and what percentage is reproduction or communication to the public may prove a complex and highly controversial procedure that could result in even further fragmentation in Europe if stakeholders or member states decide to adopt different views on the subject, locally.
iii) For future works, it seems inevitable that assignees will seek to adapt their contractual instruments to acknowledge the fact that they no longer need to compensate creators for the making available of their works directly, as that payment will be administered by CMOs. This position will likely proliferate as ISSPs start deducting payments made to CMOs against the monies they owe to the rights holders from whom they acquired the rights regarding the content they sell.
Could these downsides be addressed by raising the price of content, to compensate for the new payments made? This seems to be the general opinion held by the Coalition, who believes that prices may increase as a result of the implementation of their proposal but that, overall, “consumers may feel a degree of satisfaction that their money is not only going to what they may perceive to be “greedy corporate entities,” but to the actual individual performer(s) involved.” An opinion that will undoubtedly not be shared by everyone across the spectrum.
While certain stakeholders seem poised to benefit from this new compulsory mechanism (namely, the creators to whom royalties aren’t currently paid and their CMOs), the benefits are less obvious for others, as it seems likely that any monies royalties-earning creators might gain from their CMOs would end-up being deducted from their royalty statements. Furthermore, where CMOs charge administration fees or other type of deductions, the creators concerned may possibly realise a lower proportion of the revenues they would otherwise have been entitled to receive.
What this proposal is telling us
It is interesting to consider how the amendments proposed by ITRE and CULT expose the way certain stakeholders are picturing the current state of the digital media industry. Campaign documents such as the one drafted by the Coalition perpetuates a broader narrative according to which digital services are responsible for the poor remuneration of creators where economic analysis (evident in the music industry, for example) is signalling the exact opposite. Yet the image of wealthy technology companies abusing hard-pressed creators is gaining ground in Brussels.
ITRE and CULT only have advisory roles regarding the leading Committee (JURI), but it is nonetheless important to stress that their influence on this text is far from negligible. Years of conversations about the value gap will undoubtedly have left their mark on the debate and nurtured a wide-spread picture of the side of tech and the side of content as divided and irreconcilable parties. For services which aren’t relying on user generated content, and for all actors working on both sides of the fence, this image will be hard to uproot.
Following the debate, being part of the conversation
Copyright has always been a topic fiercely fought over in Brussels. Already in 2001, when the Directive on the harmonisation of certain aspects of copyright and related rights in the information society (n° 2001-29) was debated, MEPs reported unprecedented levels of lobbying.
With so much at stake for the creative and digital industries, a high level of engagement is to be expected. It is now down to each member of the digital media ecosystem to ensure that all sides are properly educated on the issues at stake and the consequences of the proposals they support, especially where the whole European digital licensing landscape stands to be affected.
Our team will be monitoring closely developments coming from Brussels on this topic and will be preparing monthly updates on the Proposal’s status and other texts forming part of the ‘copyright package’ released in 2016. Meanwhile, we would encourage all parties to engage in the conversation and make sure their voice is heard.
- The Committee for Legal Affairs (JURI) is the leading Committee. Their final report, drafted with input from other Committees involved, will be submitted to the vote of the European Parliament, in plenary session.
- The final vote has been scheduled for October 9 & 10, 2017.
- Art 108 3. Texto refundido de la Ley de Propiedad Intelectual, regularizando, aclarando y armonizando las Disposiciones Legales Vigentes sobre la Materia (aprobado por el Real Decreto legislativo Nº 1/1996 de 12 de abril, y modificado hasta la Ley N° 12/2017, de 3 de julio de 2017) wipo.in
- Article 5 Unwaivable right to equitable remuneration
- Where an author or performer has transferred or assigned his rental right concerning a phonogram or an original or copy of a film to a phonogram or film producer, that author or performer shall retain the right to obtain an equitable remuneration for the rental.
- The right to obtain an equitable remuneration for rental cannot be waived by authors or performers.
- The administration of this right to obtain an equitable remuneration may be entrusted to collecting societies representing authors or performers.
- Member States may regulate whether and to what extent administration by collecting societies of the right to obtain an equitable remuneration may be imposed, as well as the question from whom this remuneration may be claimed or collected.
Client Alert 2017-187
