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Comments of the Max Planck Institute for Intellectual Property and Competition Law on the Proposal for a Directive of the European Parliament and of the Council on Collective Management of Copyright and Related Rights and Multi-Territorial Licensing of Rights in Musical Works for Online Uses in the Internal Market COM (2012)372

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Abstract

The Max Planck Institute welcomes the initiative of the European Commission for a binding legal instrument on collective management of copyright and related rights in the EU. Numerous provisions are to be appreciated. Yet the Commission seems to fail to take account of the full legal framework and factual circumstances that have structured the current system of collective rights management. Disposing of natural monopolies in a two-sided market, collecting societies should not refuse to grant access to their services to rightholders and users. Hence, it is strongly recommended that the European legislature follows the experience of numerous Members States and proposes an obligation to contract with rightholders as well as with users. The critique on the Commission’s approach to cross-border licences for online rights on musical works as set forth in the Recommendation of 2005 has unfortunately not been duly considered and the Commission’s assessment of the practical effects of the Recommendation is mistaken. Differences of substantive copyright law among Member States still constitute an obstacle to the establishment of an internal market for works. This is why the Institute deems the Commission’s sectorial approach to the regulation of cross-border licensing to be problematic. Also such regulation would require further harmonisation of substantive copyright law. Moreover, the Proposal fails to take account of statutory remuneration rights and cases of mandatory collective management. Both pursue specific protection of original rightholders. In this regard the Proposal’s refusal to distinguish between different categories of rightholders raises concerns. Since collecting societies manage copyrights and related rights arising from national law, and considering the benefits of an authorisation system, which can be found in several Member States, the Institute advises the European legislature to clearly state that the intellectual property exception of Art. 17(11) of the Service Directive applies to collecting societies. The Proposal endangers the balance both between different categories of rightholders and between rightholders and users that the established system of collective management of copyright in Europe traditionally seeks to achieve. It thereby compromises the laudable goal to foster the establishment of an internal market for online uses of works across Europe.

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Notes

  1. A legislative initiative on collective rights management was first considered by the Commission in its Green Paper of 1995. See European Commission Green Paper of 19 July 1995 on Copyright and Related Rights in the Information Society, COM(95) 382 final, pp. 69–78. Then, in 2004, the Commission considered whether the internal market is in need of specific European action in the field of collective rights management. See Communication from the Commission of 16 April 2004 to the Council, the European Parliament and the European Economic and Social Committee – The Management of Copyright and Related Rights in the Internal Market, COM(2004) 261 final.

  2. As a matter of consistency, these comments adopt the term “collecting societies” as used by the Commission Proposal. Yet the Institute would recommend adopting the term “collective rights management organisations (CMOs)”, which is more frequently used in the international debate and describes more broadly and adequately the activities of collecting societies (see also para. 27, below). In contrast, the Institute does not advocate changing the term in other languages such as “Verwertungsgesellschaften” or “sociétés de gestion collective”.

  3. European Parliament Resolution of 15 January 2004 on a Community framework for collective management societies in the field of copyright and neighbouring rights, 2002/2274(INI), [2004] OJ C 92 E, p. 425.

  4. European Parliament Resolution of 13 March 2007 on the Commission Recommendation of 18 October 2005 on collective cross-border management of copyright and related rights for legitimate online music services (2005/737/EC), P6_TA(2007)0064, [2007] OJ C 301 E, p. 64.

  5. European Parliament Resolution of 25 September 2008 on collective cross-border management of copyright and related rights for legitimate online music services, P6_TA(2008)0462, [2010] OJ C 8 E, p. 105.

  6. Commission Recommendation 2005/737/EC of 18 October 2005 on collective cross-border management of copyright and related rights for legitimate online music services, [2005] OJ L 276, p. 54; Corrigendum, [2005] OJ L 284, p. 10. Note that the Commission had to correct the date of the Recommendation from May to October 2005.

  7. Commission Proposal, Explanatory Memorandum, at 1.1. (p. 2).

  8. Ibid.

  9. See pp. 46–47 of the Impact Assessment.

  10. At note 6, above.

  11. It is true that, prior to the adoption of the Recommendation, users only enjoyed a one-stop shop for multiple repertoires on a territorial basis. The Recommendation seeks to promote multi-territorial licences at the price of giving up the one-stop shop for multiple repertoires. In contrast, a combination of multi-territorial and multi-repertoire licences is achieved under the IFPI Simulcasting model agreement for reciprocal representation agreements for related rights regarding music online services (simulcasting and webcasting). In this regard, see also Commission Decision of 8 October 2002, COMP/C2/38.014 – IFPI Simulcasting, [2003] OJ L 107, p. 58 (where the Commission granted an individual exemption from ex-Art. 81(1) EC – now Art. 101(1) TFEU). In the framework of the adoption of the Recommendation, the Commission explicitly rejected the IFPI Simulcasting model as an option. See Commission Staff Working Document of 11 October 2005, Impact Assessment reforming cross-border collective management of copyright and related rights for legitimate online music services, SEC (2005) 1254, available at: http://ec.europa.eu/internal_market/copyright/docs/management/sec_2005_1254_en.pdf. The Recommendation, which indeed convinced a number of major companies to withdraw their rights from the previous international system of managing multiple repertoires based on reciprocal representation agreements, destroyed the one-stop shop for multiple repertoires even for individual territories. As explained in the following considerations of these comments, this result should have been quite foreseeable for the Commission.

  12. Commission Proposal, Explanatory Memorandum, at 1.1. (p. 2).

  13. Sec. 11 Act on Collecting Societies (Verwertungsgesellschaftengesetz, VerwGesG).

  14. Art. 65bis(2) of the Law of 30 June 1994 regarding copyright and related rights.

  15. Sec. 6 Act on the Collective Management of Copyright (Urheberrechtswahrnehmungsgesetz, UrhWG).

  16. Art. 106(3) of the Law of 2 February 1994 on copyright and related rights as last amended Dziennik Ustaw 2010 No. 90 pos. 631.

  17. Art. 11 of the Law of 3 August 2001 No. 83/2001.

  18. Sec. 81 Copyright Act.

  19. Art. 57(1) of Law No. 2121/1993 on Copyright, Related Rights and Cultural Matters. According to the overview of national regulatory frameworks of the Impact Assessment, similar provisions are to be found in the laws of Bulgaria, Hungary, Luxemburg, Romania and Slovenia. See Impact Assessment, at pp. 120 et seq.

  20. Commission Proposal, Explanatory Memorandum, at 1.1. (p. 2).

  21. Commission Proposal, Explanatory Memorandum, at 1.1. (p. 2).

  22. Sec. 17 Act on Collecting Societies (Verwertungsgesellschaftengesetz, VerwGesG).

  23. Sec. 11 Act on Collective Management of Copyright (Urheberrechtswahrnehmungsgesetz, UrhWG).

  24. Art. 56(2) of Law No. 2121/1993 on Copyright, Related Rights and Cultural Matters.

  25. Art. 106(2) of Law of 2 February 1994 on copyright and related rights.

  26. Art. 157.1 a) Copyright Law (Texto Refundido de la Ley de Propiedad Intelectual, TRLPI).

  27. Commission Proposal, Explanatory Memorandum, at 1.3. (p. 4) and Recital 5.

  28. Also as regards solving this very problem, collecting societies are important. A society that manages the rights of both the original rightholders and the publishers will work as a clearing house. In such a society, it does not matter who has entrusted the rights to the society for the purpose of guaranteeing that the rights can be licensed to users. However, the problem appears again when the royalties need to be distributed to the rightholders. Societies may solve this problem by allocating the royalties to original rightholders and publishers according to specific percentages on which these groups of rightholders agree as members of the collecting societies. In this regard, see also para. 55, below.

  29. See http://www.celas.eu.

  30. On its website, CELAS explicitly explains: “CELAS is able to license the Anglo-American EMI mechanical shares. The mechanical right consists of the right to copy the work and the right to issue copies of the work in public. This means that every time a work is copied, or a copy is issued to the public, (downloads, server copies, data storage devices etc.), royalties generated from its licensing will be collected and distributed by CELAS. In addition, for those EMI shares, CELAS is able to include the associated performing right shares.” (Emphasis added).

  31. Commission Proposal, Explanatory Memorandum, at 3.2. (p. 7).

  32. See, in general, Commission Proposal, Explanatory Memorandum, at 3.2. (p. 7).

  33. See Art. 3 lit. l) of the Proposal.

  34. Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society, [2001] OJ L 167, p. 10.

  35. This rule is based on an interpretation of Sec. 31(1) German Copyright Act (Urheberrechtsgesetz, UrhG).

  36. Landgericht München I (Munich District Court I), 25 June 2009, Case 7 O 4139/08, (2009) ZUM 788; Oberlandesgericht München (Munich CA), 29 April 2010, Case 29 U 3698/09, (2010) ZUM 709 (confirming the judgment of the District Court).

  37. Case I ZR 116/10.

  38. Directive 2001/84/EC of the European Parliament and of the Council of 27 September 2001 on the resale right for the benefit of the author of an original work of art, OJ L 272, p. 32.

  39. See also Recital 28 of the Directive, stating that management by a collecting society is one possibility by which Member States can ensure the exercise of the resale right.

  40. Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on rental right and lending right and on certain rights related to copyright in the field of intellectual property (codified version), [2006] OJ L 376, p. 28.

  41. At note 34, above.

  42. Note that EU law sometimes even makes it mandatory that certain exclusive rights be managed by collecting societies: Art. 9(1) of Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission ([1993] OJ L 248, p. 15) obliges the Member States to provide that the right to grant or refuse retransmission by cable can only be exercised through a collecting society.

  43. The Commission conducted public consultations on this issue in 2008. Information available at: http://ec.europa.eu/internal_market/copyright/levy_reform/index_en.htm.

  44. See Case C-467/08 Padawan [2010] ECR I-10055; Case C-462/09 Thuiskopie [2011] ECR I-0000 (not yet officially reported).

  45. This was also pointed out by the CJEU with regard to the right to fair compensation according to Art. 5(2)(b) Information Society Directive. See Case C-277/10 Luksan [2012] ECR I-0000, para. 100 (not yet officially reported).

  46. In this regard, it has now become very questionable in Germany whether collecting societies have the authority to split up the income from such statutory rights among original rightholders and publishers. According to the decision of a first instance court which is still on appeal, a collecting society is under an obligation to pay the whole income arising from the use of a work to the original rightholder who has entrusted his rights for all future works to the society prior to the conclusion of a publishing contract. See Landgericht München I (Munich District Court I), 24 May 2012, Case 7 O 28640/11, (2012) MMR 618. It may well be for the CJEU to say a word on this in the light of its Luksan judgment (note 45, above).

  47. Para. 13(a) of the Recommendation stipulates: “any category of right-holder is treated equally in relation to all elements of the management service provided”.

  48. Examples of such a purely authors’ society are the Polish collecting society ZAIKS and the French SACD.

  49. This reading seems to be confirmed by Recital 8.

  50. With regard to this function see also note 28, above.

  51. This was most recently acknowledged by the CJEU in its interpretation of some provisions of European copyright law. See Case C-277/10 Luksan [2012] ECR I-0000 (not yet officially reported).

  52. Commercial users are not limited to resellers, broadcasting corporations or online service providers. Also, subsequent holders of copyright, such as publishers and producers, are commercial users.

  53. See for instance Recital 12 and Art. 5(4) of the Rental Rights Directive 2006/115.

  54. See also Recital 10.

  55. Note that the different language versions are not always consistent when they use the terms “rightholders” and “members”. In Recital 17, the English version uses the term “its rightholders”, whereas the German version uses the term “ihre eigenen Mitglieder” and the French version the term “ses membres”.

  56. See note 42, above.

  57. See, for instance, Art. 42(a) et seq. Swedish Copyright Act and Art. 50 et seq. Danish Copyright Act.

  58. See Art. 42(a) (4) s.3 Swedish Copyright Act, Art. 51(1) Danish Copyright Act.

  59. In this context, a major issue of the constitution of collecting societies relates to the requirements that need to be fulfilled by rightholders to become members. On this issue see para. 34, below.

  60. Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, [2006] OJ L 376, p. 36.

  61. Commission Proposal, Explanatory Memorandum, at 1.4. (p. 5).

  62. Recital 3.

  63. Impact Assessment, note 43 (p. 11).

  64. See note 35, above.

  65. Glossary of the Impact Assessment, p. 195. There is no further definition for “management”, a difference to be noted in comparison with the leaked proposal of early July which contained a quite similar definition of “rights management” (the word “collective” being omitted) in Art. 3.

  66. See Case 127/73 R BRT v. SABAM [1974] ECR 1974, 313, paras. 8–10; Commission Decision of 12 August 2002, Case COMP/C2/37.219 – Banghalter & Homem Christo v. SACEM (only available in French), pp. 10–12, available at: http://ec.europa.eu/competition/antitrust/cases/dec_docs/37219/37219_11_3.pdf.

  67. Such as authors of musical works and publishers of musical works.

  68. Commission Communication (2004), note 1, above, at p. 4.

  69. An example is CELAS, a corporate entity with limited responsibility under German corporate law, which was established by the German GEMA and the British PRS for the grant of multi-territorial licences for online use of musical works. See also notes 29–30, above.

  70. Impact Assessment, at 24.4.2 (p. 162).

  71. For example, the Christian churches are among the debtors of the German GEMA; and public education institutions are debtors of collecting societies that administer rights in writings.

  72. For instance, one could think of a rule that forces collecting societies to change their membership requirements if more than a specific percentage of their total income is distributed to non-members.

  73. See, in particular, the ECJ decision of 21 March 1974, Case 127/73 R BRT v. SABAM [1974] ECR 1974, 313 paras. 7–11; Commission Decision in Banghalter & Homem Christo v. SACEM, note 66 above, pp. 10–12.

  74. See, for instance, Commission Decision in Banghalter & Homem Christo v. SACEM, note 66, above, p. 10.

  75. See, for instance, ibid. pp. 10–12.

  76. As can be observed in the music sector, in the sector of academic and scientific writing and generally with regard to the increasing use of Creative Commons licences.

  77. See the motion of the French Sénat of 26 October 2012, Résolution européenne portant avis motivé sur la conformité au principe de la subsidiarité de la proposition de la directive concernant la gestion du droit d’auteur et des droits voisins et la concession de licences multiterritoriales de droits portant sur des œuvres musicales en vue de leur utilisation en ligne dans le marché intérieur (COM(2012) 372), available at: www.senat.fr/leg/tas12-017.pdf, p. 2 (criticising that the Commission Proposal may be in contravention of the subsidiarity principle).

  78. “EU copyright law plan angers Radiohead, Pink Floyd”, Reuters, 11 July 2012, available at: http://in.reuters.com/article/2012/07/11/eu-copyright-idINL6E8IB3QK20120711; “Proposed royalty law fails to satisfy musicians”, irishtimes.com, 12 July 2012, available at: http://www.irishtimes.com/newspaper/finance/2012/0712/1224319858418.html.

  79. Landgericht München I (Munich District Court I), 24 May 2012, Case 7 O 28640/11, (2012) MMR 618, para. 7.

  80. Note 6, above.

  81. This fragmentation is also acknowledged by the Commission. See Impact Assessment, p. 13.

  82. Commission Decision of 16 July 2008, Case COMP/C2/38.698 – CISAC, C(2008) 3435 final.

  83. See Impact Assessment, p. 24 and also p. 10 as well as p. 12 (where the Commission relates to the different traditions of licensing of authors’ rights and other rights).

  84. See also the Commission Decision exempting this agreement from the prohibition of Art. 101(1) of the TFEU, note 11, above.

  85. This option is not even considered by the Commission in the Impact Assessment that underlies its Proposal, although the choice between the IFPI Simulcasting model and the model implemented by the Recommendation dominated the Working Paper of 2005.

  86. See, in particular, the 2007 Resolution of the European Parliament, note 4, above.

  87. See Impact Assessment, p. 43. A list of the obligations regarding users and rightholders/members imposed on these societies is presented on the same page.

  88. On this concern see also para. 12, above.

  89. Impact Assessment, p. 25.

  90. See the Impact Assessment, pp. 46 et seq.

  91. Note 11, above.

  92. In this regard, however, one has to note that the withdrawal of the authorisation runs the risk of harming those in particular who are to be protected, namely, the rightholders who will fail to collect any royalties until they find a new collecting society to which they can entrust their rights.

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Drexl, J., Nérisson, S., Trumpke, F. et al. Comments of the Max Planck Institute for Intellectual Property and Competition Law on the Proposal for a Directive of the European Parliament and of the Council on Collective Management of Copyright and Related Rights and Multi-Territorial Licensing of Rights in Musical Works for Online Uses in the Internal Market COM (2012)372. IIC 44, 322–350 (2013). https://doi.org/10.1007/s40319-013-0024-7

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