On 26 March 2019 the European Parliament voted in favour of the new EU Copyright Directive (the Directive), bringing an end to years of lobbying and negotiations, a series of delays and uncertainty about whether the day would ever arrive. The Directive contains a number of significant updates to copyright law that will likely have a major impact on the way that content is created, exploited and consumed in the digital world. For now, we will focus on arguably the most controversial aspect of the Directive – article 17 (more commonly known as article 13 but which became article 17 due to the updated numbering in the final text).
What is article 17 about and why is it controversial?
Currently, online platforms can benefit from the ‘hosting’ exemption provided by article 14 of the Directive of Electronic Commerce 2000/31/EC (E-Commerce Directive), whereby they can avoid liability arising from the content that they host (e.g., for copyright infringement), provided that they do not have knowledge of the infringing content or, upon gaining knowledge, act expeditiously to remove or disable access to it. This is similar to the position and requirements of the Digital Millennium Copyright Act in the United States and has led to the so-called ‘notice and take-down’ policies used by many online platforms.
However, that regime dates back to 2001 – a world before YouTube even existed – and rightsholders in the music and other creative industries have long argued that it is no longer fit for purpose in today’s digital age. Their complaints focus on a so-called ‘value gap’; that is the perception that online content-sharing platforms derive unreasonable value from enabling their users to make available and access copyright-protected works, without having obtained prior permission from the underlying rightsholders of those works and without having to monitor the re-upload of infringing content after a take-down notice has been filed. Article 17 seeks to address this supposed imbalance but critics have argued that it threatens to “break the internet”.
Who does article 17 apply to?
Like the original proposal by the European Commission, the Directive creates a new category of information society services, named ‘online content sharing service providers’ (OCSSPs), to which this new regime will apply. The definition adopted by the Directive is “a provider of an information society service of which the main or one of the main purposes is to store and give the public access to a large amount of copyright-protected works or other protected subject matter uploaded by its users, which it organises and promotes for profit-making purposes”. This is narrower than the definition of information society service "providers” that are subject to the E-Commerce Directive and, notably, the Directive expressly excludes from the definition of OCSSPs not-for-profit encyclopaedias, open-source software-development and software-sharing platforms, online marketplaces, B2B cloud services and cloud services that allow users to upload content for their own use.
There are certain allowances made for new and small OCSSPs, which are addressed in more detail below.
The new regime
Article 17 puts an end to the debate regarding whether online platforms commit an act of communication to the public by giving the public access to copyright-protected works, by confirming that OCSSPs will be deemed to do so. Article 17 further removes the shield of the current hosting exemption to replace it with a principle of full liability. This means that OCSSPs will be liable for copyright-protected material uploaded by users and must obtain authorisation (i.e., a licence) from the relevant rightsholders. The expectation is that OCSSPs will have to pay for such authorisation, thus closing the ‘value gap’.
However, article 17 does, in effect, create a new liability exemption regime for OCSSPs – albeit a much more onerous one than is currently provided by the E-Commerce Directive – whereby OCSSPs will not be liable for the copyright-protected works that they communicate to the public provided that they:
- make best efforts to obtain the necessary authorisation (i.e., licence);
- expeditiously take down or disable access to content upon receiving a sufficiently substantiated notice to do so by rightsholders (i.e., similar to the existing ‘notice and take-down requirements);
- make best efforts to prevent future uploads of content about which they have received a notice from rightsholders pursuant to the previous requirement (i.e. a notice and ‘stay-down’ requirement); and
- make best efforts, in accordance with high industry standards of professional diligence, to ensure the unavailability of specific works in respect of which rightsholders have provided the “relevant and necessary information”. While references to upload filters have been removed from the final version of the Directive, in practice, upload filters will need to be implemented by OCSSPs in order to comply with the Directive.
OCSSPs that have been available to the public for less than three years and that have an annual turnover of less than €10 million will only be required to comply with the first two of the requirements above but once an OCSSP has more than 5 million unique monthly users, it will also have to comply with the notice and stay-down requirement, even if it does not exceed the age or revenue thresholds.
A global repertoire database?
Both the upload filters and notice and stay-down obligations on OCSSPs are predicated on rightsholders providing them with the “relevant and necessary information” to enable them to implement these measures. In the absence of such information, OCSSPs will not be liable for a failure to comply with these obligations. The music industry has long struggled with gathering and maintaining a comprehensive record of rights. Interestingly, the United States has recently sought to address this through the Music Modernization Act by creating a new mechanical licensing collective, responsible for maintaining a publicly available database that contains information about copyright owners of musical works. While article 17 stops short of mandating a single global repertoire database, it does place the onus on rightsholders to maintain and provide accurate information on the rights that they control. In turn, each OCSSP will likely find itself managing and updating an extensive database of information, provided by rightsholders, regarding music rights ownership.
What about the memes?
One of the most common criticisms of the Directive, in its various drafts over the last two years, has been that the obligations on OCSSPs to implement upload filters will threaten freedom of expression and lead to all unlicensed content that contains copyright-protected material being blocked. It has been claimed that memes and GIFs, the life-blood of the modern internet it seems, will become a thing of the past. The European Commission has been at pains to allay these fears. The final text of article 17 provides that the filtering or blocking of content by OCSSPs should not result in non-infringing works (or works that benefit from an exception or limitation to copyright protection) being made available to users. In fact, whereas previously EU member states had the option of implementing copyright exceptions for quotations, criticisms, reviews, caricatures, parodies and pastiches, article 17 obliges such exceptions to be transposed into local legislation.
Now to the big question: can memes be considered quotations, parodies, caricatures or pastiches? Nothing is less certain, if one looks at the current body of case law governing copyright exceptions in each EU member state. It is but a short step to read in article 17 an invitation to all European courts to unify behind a common position and consider that they do.
However, despite the stated aims of the Directive, there remains uncertainty about the approach that OCSSPs will take in this respect. Many are concerned that this will be a difficult balance to strike and platform operators might choose to play it safe by taking a more cautious approach to blocking content that might lead to it being liable for copyright infringement. It also puts platform operators in the uncomfortable position of having to assess whether a particular piece of content benefits from a copyright exception; an assessment that, in many cases, it may not be qualified to make.
Impact on the music industry
The music industry has been at the heart of the debate and lobbying efforts around article 17. Aside from the value gap and upload filters, article 17 and its corresponding recitals contain a number of other provisions that could have a material impact on the way that business is conducted as summarised in this presentation.
What comes next?
The text adopted by the European Parliament will now need to be formally endorsed by the European Council on 9 April. While the Directive has had more than its share of twists and turns on the way to this point, this process is now a formality. The Directive will then be published in the Official Journal of the EU, whereupon member states will have 24 months to transpose it into national legislation. Some countries – notably France – are already actively planning for this and so it may not be much longer before we see the Directive in force.
We cannot, in good conscience, fail to mention the ‘B’ word. It is still not clear when and on what terms (and some might say ‘if’) the UK will leave the EU. The UK will be obliged to implement the Directive in full if it is still in the EU or within a ‘transitional period’ when the 24 month transposition deadline falls. However, if the UK leaves the EU on a ‘no deal’ basis, the government will have to decide whether it wishes to implement the Directive in full or in part.
Client Alert 2019-082
