The EU Copyright Directive: Potential Copyright Liability and a “Best Efforts” Standard for Platforms

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In 2019, the Council of the European Union’s Committee of Permanent Representatives approved a Directive on Copyright in the Digital Single Market to respond to developments in the modes and markets for creation, production and dissemination of information and copyrighted works. An EU directive, as distinct from an EU regulation, sets a standard that EU member states must meet with their own legislation. As a result, the focus now turns to how each state will implement the controversial rules by the June 7, 2021, deadline.

We look at key aspects of the new directive—which will likely have wide-ranging effects on online platforms that will extend well beyond EU borders—as well as considerations for companies and online service providers going forward.

Background

Many commentators saw in the EU directive an effort both to target American Internet platforms with restrictions and obligations, and to assert European interests in the global Internet ecosystem. In this respect, the new rules resemble the EU’s General Data Protection Regulation, which has begun to affect data privacy and information collection practices worldwide.

The two provisions discussed below received the most attention and criticism for their effect on major incumbent online service providers and on the environment for the development of new and competing services.

Article 15: “Protection of press publications concerning online uses”

Article 15 (formerly Article 11) grants press publishers (covering journalistic matter in any media, including newspapers and magazines) a right to be compensated for any commercial use of their content by an “information society service provider” (generally, online service providers). It is unclear how far the concept of “press publisher” extends, given that the phrase is undefined. The directive explicitly states that its protections should not “apply to websites, such as blogs, that provide information as part of an activity that is not carried out under the initiative, editorial responsibility and control of a service provider, such as a news publisher.” The right expires two years after the material is “published” (calculated starting from January 1 of the year following the date that the press publication is first published). It does not apply retroactively to material published before June 7, 2019, when the directive was adopted by the member states and came into force.

Mere hyperlinking and the “use of individual words or very short extracts” are exempt from the provision. So are merely private or non-commercial uses.

Member states are responsible for ensuring that authors of press publications receive “an appropriate share” of revenue that publishers receive under the provision. The EU Parliament stated in a press release that this right is effected in part by automatically giving right to news publishers to negotiate licensing agreements on behalf of its journalists for content used by news aggregators.

Article 17: “Certain uses of protected content by online services”

Copyright Liability and Related Obligations for UUC Platforms

The directive requires user-uploaded-content (UUC) platforms to obtain licenses from rightsholders to host and disseminate copyrighted works. This marks a change from protection that the EU’s e-Commerce Directive, issued in 2000, had historically afforded information society service providers against copyright infringement liability for the actions by their users.

Under the copyright directive, online platforms will be liable for copyright infringement by their users, unless the platforms have permission from rightsholders or can establish that they have:

  • Made “best efforts” to obtain permission;
  • Made “best efforts,” consistent with “high industry standards of professional diligence,” to ensure that any content flagged by rightsholders are made unavailable on the platform; and
  • Acted expeditiously to disable or remove copyrighted work from the platform upon notice by the rightsholder, and made “best efforts” to prevent future uploads. The prevention of future uploads requires what some refer to as an “upload filter.”

“Best efforts” is usually an extremely high standard. In this context, to determine whether a platform has met the standard, member states must consider the type and size of the platform, the user base, the types of works made available on the platform, and the available solutions and/or costs involved. Member states must ensure that platforms build an “effective and expeditious complaint and redress mechanism” for users to address disputes over the removal or disabling of content.

Platforms must provide to rightsholders, upon their request, “adequate information” regarding the practices underlying their “best efforts” at compliance with Article 17 (formerly known as Article 13). Where platforms have licensed content from rightsholders, they must also provide information on the use of any content subject to the licensing agreement.

Rightsholders seeking to remove or disable content must provide a reason for their request. In addition, they are entitled to a response “without undue delay” and review of any removal decisions by a human person (rather than a machine).

Users’ Protections and Rights

Any authorization the UUC platform receives from the rightsholder will automatically pass onto the end-user, so long as the end-user’s use of the material is not commercial or “does not generate significant revenue.” (It is not clear from the text of the directive what permissible uses may be commercial but not result in “significant revenue.”)

Any efforts by a UUC platform to secure licenses from a rightsholder should not interfere with its users’ rights to use the content in ways covered by existing exceptions to copyright infringement including for “quotation, criticism, review” and for “caricature, parody, or pastiche.” Article 17 requires member states to ensure that users have an affirmative right to use their UUC for these purposes.

Article 17 also states that its application shall not lead to any “general monitoring” obligations by the service provider. In other words, member states should not require or suggest that the platforms generally monitor UUC in any manner that would be inconsistent with data protection laws.

Member states must also enact alternative dispute resolution schemes to provide users an extrajudicial means of asserting their rights should platforms remove content that is uploaded for one of the protected categories of expression.

“Lite” Version of Article 17 for Small New Platforms

Smaller and younger platforms are entitled to a lower “best efforts” standard. Those that have been available in the EU for less than three years or have an annual revenue below 10 million euros are required to show “best efforts” only in obtaining permission from rightsholders and to act expeditiously to remove content upon notice. Once these platforms average over five million unique visitors a month, however, they must also demonstrate best efforts to prevent future uploads of protected content.

Exemptions from Article 17 Licensing Requirements

According to the Copyright Reform FAQ, certain types of UUC platforms and providers are exempt from Article 17’s licensing requirements, including:

  • Open-source software development and sharing platforms (i.e., Github)
  • Electronic communication service providers (i.e., WhatsApp)
  • Nonprofit scientific or educational repositories
  • Nonprofit online encyclopedias (i.e., Wikipedia)
  • Online marketplaces (i.e., eBay)
  • Business-to-business cloud services and UUC cloud services (i.e., Dropbox).

Other Provisions

The EU directive provides exemptions from copyright liability for the following:

  • Text- and data-mining for research organizations and cultural heritage institutions;
  • Teaching and other educational purposes by educational institutions, where the work is accredited if possible; and
  • Preserving cultural heritage.

The new rules impose certain responsibilities on the EU member states to facilitate content distribution and licensing, including:

  • Consulting “rightsholders, collective management organizations and cultural heritage institutions in each sector” to facilitate the licensing of “out-of-commerce works” (works that are not or have never been commercially available) for use by cultural heritage institutions
  • Providing an “impartial body or of mediators” to assist with concluding licensing agreements for audiovisual content of online streaming platforms (Article 10)

Implications

Supporters of the directive have argued that it was important to compensate copyright holders more fully in the online environment, while critics have cautioned against a vaguely-written law that threatens free speech and appears to target American companies as a protectionist move.

Although the directive’s text does not prescribe any particular means of detecting and removing protected works, and the European Commission has clarified that it does not require “any specific technology to recognise illegal content,” many have criticized the “best efforts” standard as essentially requiring all covered platforms to establish a content identification and filtering system. Critics point to the fact that the “best efforts” standard requires platforms not only to remove copyright-protected content in reaction to notifications but also to prevent future uploads of copyright-protected content. Others have noted that any filtering system is inherently unreliable and prone to removing permitted user-generated content, like memes and gifs. And more have criticized the standard as imposing a burden that only the biggest and most resourceful companies can meet, thereby securing their monopoly or increasing their market share in the EU.

The European Commission and the member states are expected to organize “dialogues” among stakeholders to arrive at a uniform application of the directive. The 28 individual member states will then have up to 24 months to enact local legislation to meet the directive’s requirements.

France became the first member state to implement the provisions of the directive on July 23, 2019. It was added to the country’s Intellectual Property Code (IPC) “to create a neighboring right for the benefit of the press agencies and the press editors” outlining the rights of press editors and news agencies. The new French law requires platforms to obtain authorization from a press agency or publisher before reproducing or communicating all or part of the press’s publication in accord with the core change of Article 15 of the directive.

Other sections of the law show that France’s implementation of Article 15 goes beyond the requirements of the directive. Whereas the new rules state that “Member States shall provide that authors of works incorporated in a press publication receive an appropriate share of the revenues that press publishers receive for the use of their press publications by information society service providers,” Article L.218.4 of the French IPC requires platforms, when determining compensation, to base it on direct or indirect operating revenue of any kind or a flat rate and to consider things like the human, material and financial investments the publishers and press agencies made. Platforms must also base compensation on the contribution made by the publication’s political or general information, and the importance of the press publications to online public communication services.

In addition, Article 15 only states that it will not apply “in respect of the use of individual words or very short extracts of a press publication.” The French law, however, goes further and states that this exception does affect the rights provided by Article L.218-2, particularly where short extracts can substitute for the press publication or otherwise allows the reader to dispense with the need to refer to the publication.

No member state has formally adopted the provisions of Article 17 of the directive. In fact, in Poland v Parliament and Council, Poland has filed a legal challenge before the Court of Justice of the European Union, seeking to annul Article 17 in its entirety or at least the article’s sections that require platforms to make their “best efforts” to remove and prevent the future upload of allegedly infringing copyrighted material. The plea alleges that the provisions of this section of the directive infringe on the right to freedom of expression and information guaranteed by Article 11 of the Charter of the Fundamental Rights of the European Union.

Although implementation may vary across the European Union, as a practical matter, the most aggressive implementations may create a standard that will affect a company’s EU-wide practices and policies. While many details remain unknown, the directive has begun to affect U.S. companies that have customers and users in the EU.

Online service providers should monitor further implementations carefully and consider what their political allies can do to help shape the national laws. They must weigh the need to comply with restrictions and obligations against the importance of the European market or specific national markets. They should also study the logistical challenges of compliance and the possible licensing frameworks and terms.

Companies familiar and experienced with processes for qualifying for safe harbor under the Digital Millennium Copyright Act will find the challenges of the new European requirements more complex. Vigilant monitoring and preparation are advisable.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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