Art. 17 of the EU Directive on Copyright in the Digital Single Market (“DSM Directive”), which deals with the liability of certain online services for infringing activities of their users, was one of the main pillars of the last copyright reform at EU level, which led to the DSM Directive. At the same time, it has caused a lot of concern not only in the legislative process, but also when implemented by Member States. The key issue has always been how to reconcile all the fundamental rights affected by Art. 17 of the DSM Directive (see our earlier blog here for more detail on Art 17).

Background

Following the adoption of Art. 17 DSM Directive in April 2019, Poland brought an action for annulment before the CJEU. The aim of the action was to have (parts of) Art. 17 DSM Directive declared null and void on the grounds of a violation of freedom of expression and information, Art. 11 of the EU Charter of Fundamental Rights (ECFR). Poland’s key argument was that Art. 17 DSM Directive moves away from the “notice and takedown” procedures that have been accepted for years and instead makes platforms responsible for taking active actions to avoid liability for copyright infringement. Poland further argued that the obligations imposed by Art. 17 DSM Directive would lead to the implementation of filtering systems, and that these systems would not be able to distinguish sufficiently between permitted and prohibited uses, resulting in false positives and over-blocking.

Following the Advocate General's Opinion from July 2021, the ruling now issued has been eagerly awaited.

Ruling

The CJEU has dismissed Poland's annulment action, confirming that Art. 17 DSM Directive is in line with the fundamental rights under Art 11 ECFR, of freedom of expression for users of online services – provided that the safeguards under Art. 17 DSM Directive are sufficiently taken into account.

The CJEU held that Art. 17 DSM Directive – as the AG also stated in his Opinion – results in a de facto obligation to use “upload filters” to proactively prevent certain content from being published. Having to employ such filter software in principle amounts to a limitation of the freedom of expression enshrined in Art. 11 ECFR. That said, the CJEU confirmed that this limitation meets the requirements of Art. 52 ECFR, that any limitation must be provided by law and respect the essence of the fundamental rights and freedoms, because of safeguards laid down in Art. 17 (7) to (10) DSM Directive:

• Art. 17 (7) DSM Directive prescribes that there must be no blocking of legal content. This also means that a system that cannot sufficiently distinguish between unlawful and lawful content would be incompatible with Art. 11 ECFR.
• There is no obligation for the online services covered to use filter software without being provided with relevant rightsholders' data beforehand. This means that rights holders who want to have their works blocked by means of upload filters must provide online services with the information needed for filtering.
• Art. 17 (7) DSM Directive provides an EU-wide uniform protection with regard to important rights for users, of which they must be informed by the online service.
• Article 17 (8) DSM Directive (which governs the prohibition of general monitoring obligations) has the consequence that an autonomous assessment prior to upload cannot be required from online operators.
• Art. 17 (9) DSM Directive introduces procedural safeguards for erroneous blocking. This requires human review without undue delay.

The CJEU made it clear that Member States are obligated to ensure a due balancing of interests in line with the standards it sets in this landmark ruling.

Outlook

The CJEU's decision brings much needed clarity. On the one hand, it is now clear that Art. 17 DSM Directive is in principle compatible with EU fundamental rights. On the other hand, the decision also provides necessary guidance on the safeguards that must be implemented by Member States, and honoured in enforcement of the DSM Directive, to ensure that fundamental rights are also upheld in practice.

First of all, there is no mandatory conclusion of licenses – neither for rights holders nor for the online services concerned. But if there is no licensing and the rights holder provides information for filtering software, Art. 17 DSM Directive will de facto require the implementation of upload filters.

However, a strict standard must be applied here, so that an adequate balance is struck in the inevitable conflict (according to the CJEU) between the intellectual property rights of rights holders and users’ freedom of expression. The CJEU’s restrictive interpretation will most likely limit the scope of obligations for online services under Art. 17 DSM Directive: only “manifestly infringing” content (as laid down by the AG in his Opinion) must be blocked before publication. In cases of doubt, the rights of users prevail.

The decision also highlights the different efforts that must be made by those platforms that are not covered by Art. 17 DSM Directive. The CJEU emphasizes that the provision only applies to certain services. Beyond its scope, the existing legislation - which will soon be reformed by the Digital Services Act on which political agreement has just been reached on 22 April - applies. The applicable law beyond the DSM Directive has also been clarified by CJEU, in its 2021 rulings on YouTube and Cyando (see our blog post here).

All that said, even this decision is not a free pass. For even if the CJEU has declared Art. 17 DSM Directive compatible with fundamental rights, this does not automatically mean that all national implementation laws at Member State level are equally compatible with fundamental rights. Different Member States have chosen substantially different approaches - Germany, for example, is the only country to have created a rebuttable presumption that "short" excerpts of

works are permissible. Disputes from a national perspective can be expected in the next couple of years. This ruling will therefore likely not be the last time the CJEU will have to answer the question of incompatibility with fundamental rights.

Besides that, it is clear that the Commission will now have to adapt its published guidelines. This had already become foreseeable after the AG’s Opinion last year. The CJEU has now ruled that an autonomous assessment of certain content prior to its upload is inadmissible. In contrast, the Commission had provided for this in its guidelines for certain content (so called “earmarked” content, see our blog here). Moreover, the decision is also relevant to the Digital Services Act's reform of liability (see our recent blog posts here and here). This is because the ban on general monitoring obligations applies to all platforms.

The rules of platform liability are continuously being shaped – our online intellectual property and regulatory team is keeping track of all developments and closely advises industry stakeholders on every step of the way to compliance.