Internet governance rules in the EU are about to change radically. The final version of its Directive on Copyright and Related Rights in the Digital Single Market (DSM), which has been under consideration for the past three years, was promulgated on April 17, 2019. EU member states now have two years to transpose the Directive’s rules into their national laws.
In some respects, the DSM Directive is better than previous drafts (of which more anon). There is still reason to worry the new rules will be harmful for freedom of expression and information privacy interests of individual creators and users. How much harm will depend on how member states implement the Directive and how courts interpret it, as many of its terms are ambiguous.
This column discusses key differences between earlier drafts of the DSM Directive and the final version and makes some general observations on some aspirations that underlie this Directive.
Repeal of the Safe Harbor for ISP Storage of User Contents
The most significant and controversial of the new DSM rules is the stiffer liability rules the Directive established for online content-sharing platforms, such as YouTube and Facebook.
There is still reason to worry the new rules will be harmful for freedom of expression and information privacy requests.
Under laws in place in the EU and U.S. since 1998, Internet service providers (ISPs) have enjoyed a safe harbor from liability for infringing acts of their users of which the ISPs were unaware. ISPs faced liability only if they failed to investigate and take down infringing materials after receiving notice from copyright owners about where such materials were located.
Article 17 of the DSM Directive (Article 13 under previous drafts) imposes strict liability on online content-sharing sites for user infringements and obliges them to use "best efforts to ensure the unavailability of specific works." Because EU member states may decide that "best efforts" requires platforms to use filtering technologies, this provision has often been called the "upload filter" rule. (Previous drafts of the Directive were more pointed about the need to use filtering technologies.)
There are two exceptions to the DSM Directive’s strict liability rules for online content-sharing platforms. One is for nonprofit services, such as online encyclopedias, educational and scientific repositories, and open source software developing platforms. A second is for startup online content-sharing services that have been available to the EU public for less than three years and that have annual revenues of 10 million euros or less. The liability of these two types of services for user infringements are subject to compliance with the existing notice and takedown rules.
Critics have charged that the DSM strict liability rules will interfere with user freedoms to make lawful uses of copyrighted works, such as parodies or critical commentaries, because filtering technologies cannot distinguish between outright infringements and privileged uses.
Seemingly in response to this criticism, Article 17 now states that member states "shall ensure that users in each Member State are able to rely on exceptions for "(a) quotation, criticism, review; (b) use for the purpose of caricature, parody, or pastiche."
Whether this effort to ensure privileged uses can be uploaded to content-sharing sites will meaningfully limit the Directive’s scope or serve only as aspirational window dressing remains to be seen. It seems unlikely, though, that EU member states can require developers of filtering technologies to refine their algorithms so that all parodies, critical comments, and other privileged uses will remain available to the public. Yet, this seems to be the only way to ensure privileged uses can be preserved.
Text and Data Mining Exceptions
Under existing EU law, text and data mining on digital repositories of copyrighted works and databases had an uncertain status. The drafters of the DSM Directive decided this activity should be lawful because of the important insights the use of such research tools can enable. To this end, they proposed in Article 3 that member states adopt a mandatory new exception to copyright and database rules to allow nonprofit research and cultural heritage institutions to engage in text and data mining for scientific research purposes.
While this exception was good so far as it went, earlier versions of the DSM Directive would have left independent researchers and profit-making text and data miners out in the cold. Because EU policymakers aspire to foster the growth of artificial intelligence and other data-intensive businesses, they came to recognize restricting text and data mining to nonprofit scientific research was shortsighted, especially given that other countries, notably the U.S. and Japan, have adopted broader text and data mining privileges.
While Article 3 retains the text and data mining exemption for nonprofit scientific research, the final DSM Directive sets forth a new Article 4 requiring member states to create a more general mandatory exception to copyright and database rules to allow text and data mining by independent researchers and profit-making establishments without restriction on purpose.
Although Article 4 is broader than Article 3 in the users and uses to which it would apply, Article 4 is more limited than Article 3 in two respects: First, the Article 4 exception does not apply to the extent that rights holders have expressly reserved the right to control text and data mining. Second, the Article 4 exception can be overridden by contract, whereas the Article 3 exception is nonwaivable by contract.
Press Publishers Right
The final version of the DSM Directive directs member states in Article 15 (previously Article 11) to grant press publishers two years of exclusive rights to control reproductions and communications to the public by information society service providers.
Earlier versions of the DSM Directive’s press publisher right attracted intense criticism. Opponents charged it would impede the free flow of news and other information vital to a democratic society, harm journalists who often rely on search engines and aggregators, and create uncertainty about its coverage and scope. Critics also thought this new right was unnecessary, unlikely to produce significant licensing revenues, and likely to further entrench powerful media conglomerates and global platforms to the detriment of smaller players.
Critics also expressed concern about how the new publisher right would interact with existing copyright laws, which typically allow for fair quotation rights, as well as with database rights, which allow users to extract insubstantial parts of databases.
Earlier versions of the DSM Directive’s press publisher right attracted intense criticism.
Notwithstanding serious concerns about the press publisher right, the EU Council and Parliament decided to approve the grant of this new set of exclusive rights.
Seemingly to counter the charge that Article 15 would create a "link tax," Article 15(1) explicitly provides that the press publisher right does not apply to hyperlinking. In an effort to further narrow its reach, Article 15(1) says it would not apply to "private or non-commercial uses of press publications by individual users." Nor would it apply to use of individual words or very short extracts of a press publication."
But what exactly constitutes a "very short extract" of a press publication is unclear. Ambiguities about this and other terms in Article 15 makes it unlikely that member states of the EU will implement this new right in a harmonious way.
Licensing as a Goal of the DSM Directive
Proponents of the DSM Directive told European policymakers a powerful story in support of the new liability and exclusive rights rules that the Directive has now established. They assert there is a "value gap" the Directive could correct.
The short version of that story is that U.S. technology companies are making huge revenues from their uses of European rights holders’ contents and too little of these revenues are flowing to European content providers. (Both European and American commentators have expressed considerable skepticism about the "value gap" story, but it was an influential part of the rationale for adopting Articles 15 and 17.)
To narrow, if not close, this gap, the DSM Directive aims to induce technology companies to negotiate for licenses. If such licensing occurs, then the stricter rules will not need to be applied, and worries about harms to freedom of expression and other social values expressed by critics of the stricter liability rules will not come to pass.
Consider, for instance, Article 17(1). After providing that online content-sharing sites will be strictly liable for giving the public access to infringing copyright-protected contents uploaded by users, that provision goes on to say that to avoid this liability, such sites "shall obtain an authorization" from rights holders "by concluding a licensing agreement" that would cover any otherwise infringing uploads.
It is not even remotely possible for online content-sharing services to get licenses from every copyright owner of European works available in digital form. The aspiration of Article 17 seems to be to induce platforms to obtain licenses from major European copyright sectors, such as motion-picture producers, recording-industry firms, and collecting societies that represent other kinds of rights holders (such as performing artists).
Article 17 gives European rights holders considerable leverage to insist on substantial revenue flows and other licensor-friendly terms as a condition of granting such licenses. Negotiating such licenses will be daunting because each member state of the EU has its own national law, domestic copyright industries, and collecting societies. Despite the Directive’s aspiration to establish a "digital single market," no such market exists. You-Tube and Facebook may be able to navigate the complexities of the EU markets, but smaller service providers may find it difficult or impossible to conclude negotiations that will shield them from Article 17 liability.
Licensing is also the principal goal of Article 15. The Recitals of the DSM Directive, which serve as a kind of explanatory preamble, emphasize that high-quality journalism, which is important to fostering well-informed public debate and democratic discourse, is expensive to produce. The goal of Article 15 is to enable licensing so that press publishers can develop sustainable business models.
Whether the licensing goals of the DSM Directive will be fulfilled also remains to be seen.
Although news aggregators, monitoring services, and search engines make considerable revenues from advertising or subscriptions, very little, if any, of those revenues are shared with the press publishers, which seems unfair because the contents these services provide to their users come from those publishers.
As with Article 17, Article 15 creates a liability risk for online services that make use of EU press publisher contents that only licensing can overcome. As with Article 17, Article 15 provides press publishers with considerable leverage to conclude licenses on favorable terms to EU firms.
Conclusion
It remains to be seen how EU member states will transpose the rules set forth in Articles 15 and 17 in their national laws. Perhaps some national legislators will coordinate efforts to resolve some key ambiguities in the Directive (such as the "best efforts" language of Article 17 and "small extracts" in Article 15) in a manner that will enable the relevant online service providers to assess the risks of liability and benefits of licensing on fair and reasonable terms.
Whether the licensing goals of the DSM Directive will be fulfilled also remains to be seen. Some online content-sharing sites may decide to license European contents, but many smaller entities may decide to risk liability and/or limit the availability of their services in the EU.
The experience of Germany and Spain, both of which adopted a press publisher right similar to Article 15, does not bode well. Both countries hoped to induce U.S. tech companies to license press publisher news these services provided to their users. Very few licenses were concluded, and some online services just stopped providing news from those countries.
Maybe the EU-wide nature of the new DSM rights will serve as a stronger incentive for licensing, but it is too early to conclude that either Article 15 or Article 17 will be effective in bringing more revenues to EU rights holders. One thing is for sure: U.S. online services providers face some difficult challenges in deciding how to proceed in response to the new DSM rules.
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