Closing the Gap

The EU’s Digital Copyright Directive and the balance of interests between copyright owners, internet platforms and consumers

Jan 6, 2021

In 2015, the European Commission published its Digital Single Market Strategy which set out its goal to establish a “Digital Single Market”: an environment “where individuals and businesses can seamlessly access and exercise online activities under conditions of fair competition, and a high level of consumer and personal data protection”.

Among the array of proposed legislation stemming from this agenda includes the Digital Copyright Directive (DCD), which is now set to come into force in June this year after being formally adopted in April 2019. The Directive is the result of heavy lobbying from certain stakeholders, most notably those from the music industry, as well the EU’s ambition for a modernised and fairer system of copyright for the digital age.

Interestingly, the UK will not be implementing the DCD into domestic law despite being an initial supporter of the legislation. The Withdrawal Agreement between the UK and the EU provided an implementation period, which ended on 31 December 2020, during which EU law could be transposed into the UK law for a seamless legal transition after the UK leaves the EU’s legal orbit. As the deadline for implementing the DCD in June 2021 comes after the deadline for the implementation period, the Secretary of State for Business, Energy and Industrial Strategy announced last year that the UK would not be implementing the Directive.

The UK’s refusal to implement the DCD may come as a relief to some. While the EU argues that the Directive will create a fairer system for the use of copyrighted content online, some have criticised certain of its stipulations. This included the infamous Article 13 (now Article 17 in the final version) which, according to some, would impose requirements on the likes of YouTube and Facebook to operate upload filters on their platforms to detect infringing content from users.

Amendments were made in response to such criticisms, yet it remains to be seen how Member States implement the DCD and deal with the issue of upload filters. Such an issue forms part of the Directive’s backdrop, which is to strike a balance between various agendas.

The Interests at Play

EU intellectual property law concerns numerous stakeholders each desiring for the law to be synchronised with their respective interests. For digital copyright, the main stakeholders are copyright owners, internet platforms and consumers. The EU must carefully construct rules that strike an appropriate balance between the interests of these three stakeholders.

EU copyright law is principally concerned with protecting authorial works belonging to, inter alia, global music industry agencies, news and media companies and press publishers. Such entities use the internet to distribute their works widely and often with lucrative success. In doing so, copyright owners “generally seek copyright and related rights protection facilitated by collective licensing agreements and other forms of private ordering” in order to successfully capitalise on the opportunities presented by the world wide web.[1]

Under EU law, internet platforms are defined collectively as “information society services” (ISSs). This refers to, within its wide scope, “actors who are involved in selling goods or services online, offering online information, providing search tools” and other services.[2] The likes of YouTube, Facebook and Google would therefore be classed as ISSs. Generally, in contrast to copyright owners, these internet platforms prefer a copyright framework involving limited or qualified liability or a broad nature. This is argued on the basis of a neoliberal legacy in which regulatory interference is said to undermine competitive diversity and innovation,[3] of which is ultimately to detriment of the consumer.

The European Commission recognises consumers as an integral part of its legislative agenda for copyright in the EU: copyright “underpins creativity and the cultural industry in Europe” whereby a significant number of Europeans use the internet to access digital entertainment and media. The impact of copyright rules on consumers is therefore an important consideration for the EU. These stakeholders “generally seek limited protection in the light of certain declared public interests such as freedom of expression, information, and Internet access”.[4] In essence, consumers want the freedom to create and consume on internet platforms with minimal regulatory interference.

For the EU, balancing the rights and interests of these stakeholders “has always been at the heart of IP law and policy”.[5] In recent years, the Commission has focused on refining copyright law in response to the issues associated with an increasingly digital world. More specifically, it has recognised the need to address “the growing involvement of [internet] intermediaries in content distribution” (see also Recital (61) of DCD). This thus forms the backdrop to the DCD and modern EU copyright law.

Safe Harbour

The ownership and the type of works covered by copyright is governed by the law of Member States. EU legislation does not prejudice these property systems and is therefore only supplementary in its role. Nevertheless, EU law does achieve three important functions.

In terms of the first function, EU law imposes a baseline requirement on Member States to protect the copyright of authorial works,[6] given that such protection is a fundamental right.[7] The second function is to prescribe “the benefits of copyright ownership as comprising a closed list of exhaustive economic rights”, for example the right to communicate works to the public.[8] The limitations of and exceptions to copyright form the third function of EU law. The limitations set the boundaries of copyright. For example, third parties are permitted to make temporary copies of works for certain technical purposes. The exceptions permit the use of copyrighted works by third parties for certain purposes, such as “research, news reporting, criticism or review, study, instruction, quotation, or parody”.[9]

The second and third functions underpin the vast majority of EU legislation of which seeks to achieve a balance between the different stakeholder interests. For digital copyright, this has consisted mainly of the Information Society Directive (ISD), and the E-Commerce Directive (ECD).

The ISD’s purpose is to protect copyright within the internal market, particularly in the context of ISSs (Article 1). It achieves this by clarifying the rights afforded to copyright owners and mandating how those rights should be enforced in the online environment.

Under Article 2, copyright owners have the exclusive right to authorise or prohibit temporary or permanent reproduction of their works. However, this reproduction right is subject to Article 5(1) which states that temporary acts of reproduction that are technically necessary to provide users access to copyrighted works (as is the case with web browsing) are permitted. Further exceptions to Article 2 include works used for inter alia private purposes, teaching or scientific research, and criticism or review.

Separately, Article 3 gives copyright owners the exclusive right to authorise or prohibit any communication to the public of their works. This applies to communications by wire or wireless means, including where the public can access works at a time chosen by them, as is the case when accessing social media platforms. Like Article 2, this right of communication is also subject to certain exceptions.

EU law provides that copyright owners must have the ability to apply for injunctions in their national courts against infringers.[10] This includes injunctions against intermediaries whose services are used to commit the infringement, as can be the case with ISSs. Accordingly, Article 8 of the ISD provides that copyright owners must have the means to bring an injunction against ISSs where copyright infringement is taking place on their platform, subject to the ECD.

The ECD limits the liability of internet platforms for copyright and related rights infringement. It does so through a hosting exemption and a general monitoring exemption. Article 14 details the hosting exemption: an ISS is not liable for content on its platform, uploaded by its users, which infringes copyright. This is the case provided that the ISS does not have actual knowledge of such illegality and, when it does have such knowledge (namely when a copyright owner brings the infringement to its attention), it acts expeditiously to remove or disable access to that content.[11]

Article 15 details the general monitoring exemption: even where an ISS is required to remove or disable access to illegal content on its platform, it cannot be subject to a general obligation to monitor the content uploaded to its platform by users. This means that platforms are not required “to proactively look for and filter out illegal content on an ongoing basis”.[12]

The ISD and the ECD significantly limit the liability of internet platforms with three exemptions: the temporary technical copies exemption, the hosting exemption and the general monitoring exemption. Thus, the full extent of an ISS’s liability is restricted to taking down content when its illegality is flagged by the copyright owner. This regime, which omits imposing proactive obligations on internet platforms to deal with infringing content, has been characterised as a ‘safe harbour’.[13]

The safe harbour demonstrates how the EU has traditionally viewed internet platforms as conduits which provide a service that simply hosts and communicates information to users. Accordingly, “its conduct is merely technical, automatic and passive, pointing to a lack of knowledge or control of the data which it stores”.[14] Given this, the EU has justified the safe harbour on the policy grounds of commercial practicality and fairness.[15]

For many years, such limited regulatory interference gave way to a broad freedom of commerce for internet platforms. YouTube, Facebook and Google have thus been able to pursue their business models, consisting of free services supported by advertisements,[16] with the protection of the safe harbour. Accordingly, throughout the 2000s, such platforms “took advantage of copyright content provided illegally by users to generate revenue through ads, not just for rights-holders but also themselves”.[17]

However, copyright owners have fervently argued that the safe harbour has protected the business models of these internet platforms whilst allowing copyright infringements to proliferate, resulting in the so-called “value-gap”: the difference between the revenues internet platforms accumulate from the use of copyrighted works on their platform and what copyright owners are paid for the use of such works on other systems. For example in 2014, record companies managed to garner $1.6 billion in revenues through streaming services like Spotify and Deezer, compared to only $641 million of revenues generated from YouTube notwithstanding the superior viewership of over a billion monthly users on the video-sharing platform.[18]

Thus, for copyright owners, the proliferation of copyright infringement by users facilitated by internet platforms, and the resulting value-gap, pointed to an imbalance vindicating “stronger obligations on [platforms] to thwart infringements”.[19] Only with such protection can copyright owners successfully capture the value of their works and fully exploit the advantages that the internet can provide, so the argument goes.[20] The Commission’s introduction of the DCD thus aims to address these issues.

Article 17 and Upload Filters

The DCD further harmonises rules around copyright with a particular focus on the digital use of protected content, as stated in Article 1. The Directive therefore complements and amends aspects of the previous legal regime so as to address its apparent flaws. It does most significantly through Articles 17 and 15.

Article 17 of the DCD is predominantly about closing the value-gap. It does so by, first of all, limiting its obligations to “online content-sharing service providers” (OCSSPs): ISSs which store and give the public access to a large amount of copyright-protected works uploaded by its users which it organises and promotes for profit (Article 2(6)). The DCD therefore focuses on specific types of ISSs with user-generated content, in particular “well-known platforms like YouTube, Facebook or Vimeo”.[21]

With its focus defined, Article 17 places stricter obligations on OCSSPs that contrast with the safe harbour in numerous ways. Firstly, when OCSSPs make copyrighted works available to users, they are performing an act of communication as under Article 3 of the ISD (Article 17(1)). This contrasts from Article 5 of the ISD, which states that temporary copies necessary for technical purposes are not public communications. This part of the safe harbour is therefore annulled for OCSSPs.

Secondly, since OCSSPs are communicating works by hosting user-generated content, they will be infringing the rights of copyright owners unless either the service provider has authorisation from the copyright owner (for example under a licensing agreement) or is otherwise exempt from liability under Article 17(4). Accordingly, the hosting exemption under Article 14 of the ECD will no longer be available to OCSSPs.

In the absence of a licensing agreement, Article 17(4) exempts OCSSPs from liability under Article 17(1) if they can meet a set of cumulative conditions. Effectively, the service provider must be able to show that it has used its best efforts to detect infringing content, ensure its removal and prevent its future upload. The factors to be taken into account to determine whether a platform has used its ‘best efforts’ include, under Article 17(5), the audience and size of the OCSSP, the type of content uploaded by its users and the availability of suitable and effective measures. Exemptions for quotation, criticism, caricature, parody or pastiche still apply (Article 17(7)).

For copyright owners, Article 17 gives them greater control over their works online. This is due to the provision favouring licensing agreements as the main form of authorisation.[22] Thus, the EU has “handed the music industry the clear-cut licensing mandate it wanted and thereby removed its business dealings with [internet platforms] from the shadow of the [ECD’s] safe harbour.”[23] Accordingly, it may be easier for copyright owners to capture the value of their works by allowing them to directly regulate their use, with the compliance burden falling on internet platforms.[24] It is in effect a reallocation of risk. At the same time though, Article 17 also gives platforms options to mitigate that risk, namely by either concluding licensing agreements with copyright owners or using their best efforts to deal with infringing content.

On the other hand, the ‘best efforts’ exemption could prove cumbersome for internet platforms. It has been argued that this exemption requires platforms to “deploy automatic content recognition technologies that examine all uploaded content.”[25] These so-called ‘upload-filters’ require the general monitoring of uploaded content to work effectively. So while Article 17(8) explicitly states that such general monitoring is not required of internet platforms (echoing Article 15 of the ECD), it may be difficult to see how else the requirements under Article 17(4) can be satisfied.[26]

Indeed, a complaint has been lodged with the ECJ by Poland challenging the legality of Article 17. The Polish Government argues that the only way to comply with Article 17 is to use automated filtering technology of which undermines “the essence of the right to freedom of expression and information”. Given this, Poland has suggested that the Court annul Article 17(4). A judgment is yet to be given.

Furthermore, the use of upload filters could have a number of adverse consequences. Firstly, such technology may not be advanced enough and thus be “too sensitive and block completely legitimate content…or…content which technically infringes, but the copyright owner might never have complained and might have preferred to see their work being shared widely.” As a result, platforms might be accused of infringing individual rights such as free speech, potentially inviting political furore and litigation risks.

Secondly, there may be data protection implications of using upload filters. Such technology would need to be capable of identifying when content is used for a legitimate purpose, such as for criticism or review. This means that “[t]he identity, place, date and time of upload would therefore be relevant for the processing by the filtering mechanisms”, inevitably involve the processing of personal data. While Article 6(1)(c) of the GDPR permits data processing to fulfil a legal obligation (in this case, that legal obligation being Article 17(4) of the DCD), the ambiguity as to whether upload filters are in fact required under the DCD means that such a legal basis may be questionable at best and potentially create compliance problems for internet platforms in this area.[27]

Online News Aggregators

Articles 2 and 3 of the ISD give copyright owners the right to reproduce and communicate their works. Article 15(1) of the DCD confirms that press publications are entitled to exercise those rights online. Therefore, authorisation from press publishers must be obtained before their works are used by online news aggregators or other platforms. Exceptions to this include private or non-commercial uses, acts of hyperlinking, and the use of very short extracts. These rights expire two years after publication of the work and does not apply to works first published before 6 June 2019 (Article 15(4)).

This provision “is aimed at redressing a perceived lack of power on the part of press publishers when it comes to control over online use” of their works. It does this by giving publishers the ability to negotiate licensing agreements with news aggregators. Publishers can then recoup the “organisational and financial contribution” evident in such works.[28]

The potential shortcoming of Article 15, however, is that its utility may depend on the cooperation of internet platforms. Google, which owns the news aggregator Google News, has suggested that it would not conclude licensing agreements with publishers to have their content listed on its platforms since Google is in the business of selling advertising space rather than search results. Accordingly, the tech giant has claimed that it will simply reduce the amount of the work that it displays on its search results, taking advantage of the relevant exemptions under Article 15(1). Thus, Article 15 could have the effect of “further strengthening the power of media conglomerates and of global platforms” at the expense of publishers despite its aim to achieve otherwise.

A Balance Well Struck?

For copyright owners, the DCD firmly establishes their rights and provides avenues for their protection and enforcement. It does so by replacing the previous safe harbour with proactive obligations for internet platforms. Such platforms will be required to engage with copyright owners to ensure that copyrighted works are protected online. That engagement may be direct (through licensing agreements) or indirect (through the ‘best efforts’ exemption). This is with the aim of closing the value gap, reallocating more commercial risk to the internet platforms and therefore shifting the balance more in favour of copyright owners.

However, such a shift may be to the detriment of consumer interests. The Directive is explicit about the rights of copyright owners whilst vague on the exact obligations of internet platforms. In addition, little reference is made to how the rights and freedoms of consumers should be protected. Accordingly, internet platforms may choose to prioritise the protection of copyright owners (to the extent that their central business models are not undermined) and focus less on the rights and freedoms of consumers, in the form of aggressive censorship which may have the consequence of significantly limiting freedom of expression. This may be the case if the risk of consumer backlash from such prioritisation (in the form of complaints and potential litigation) is less than the risk arising from aggrieved copyright owners consisting of large media conglomerates with the commercial power and resources to enforce their rights against the internet platforms.

The DCD does make a clear effort to ensure a fairer balance between the interests of the relevant stakeholders. It does so mainly by placing more responsibility on internet platforms and thus making it easier for copyright owners to exploit their works online. However, whether this achieves a fair balance between these stakeholders and consumers will largely depend on how the Directive is implemented across the Member States. The true effectiveness of the DCD in achieving its aims therefore remains to be seen.

[1] Justine Pila and Paul Torremans, European Intellectual Property Law (2nd edn, OUP 2019) 235.

[2] Lilian Edwards, Law, Policy and the Internet (Hart Publishing 2019) 265. See also Directive 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce) [2000] OJ L178/1, Recital (18) and C-390/18 Airbnb Ireland [2019] EU:C:2019:1112.

[3] Shoshana Zuboff, The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power (Profile Books 2019), 108.

[4] Pila and Torremans (n 1), 235.

[5] Ibid, 221-222.

[6] Pila and Torremans (n 1), 222.

[7] The Charter of Fundamental Rights of the European Union, Article 17(2).

[8] Pila and Torremans (n 1), 222.

[9] Ibid.

[10] Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights [2004] OJ L195/16, Article 11.

[11] Ibid, Article 14(1)(a) and (b).

[12] Lilian Edwards (n 2) 270.

[13] Shikhiashvili L, ‘The Same Problem, Different Outcome: Online Copyright Infringement and Intermediary Liability under US and EU Laws’ (2019) 24 Intellectual Property & Technology Law Journal 125, 135.

[14] Case C-236/08, Google France v Louis Vuitton [2010] ECR-I 2417, para. 114. See also Directive 2000/31/EC (n 14), Recital (42).

[15] Lilian Edwards (n 2), 257.

[16] Shoshana Zuboff (n 3) 83.

[17] Lilian Edwards (n 2), 257.

[18] IFPI, Digital Music Report 2015: Charting the Path to Sustainable Growth (2015), 23.

[19] See Robbins TD, ‘The Justification, Consequences, and Controversy of the Directive on Copyright in the Digital Single Market’s Article 17 (2019) Stanford-Vienna European Union Law Working Paper No. 42, 7.

[20] Helpman E, ‘Innovation, Imitation, and Intellectual Property Rights’ (1993) 61 Econometrica 1247, 1248. See also Adam Smith, The Wealth of Nations (first published 1776, Capstone Publishing 2010) 28.

[21] Quintais JP, ‘The New Copyright in the Digital Single Market Directive: A Critical Look’ (2020) European Intellectual Property Review 1, 17.

[22] Quintais JP et al, ‘Safeguarding User Freedoms in Implementing Article 17 of the Copyright in the Digital Single Market Directive’ (2019) Intellectual Property, Information Technology & Electronic Commerce 10(3) 277, 277.

[23] Bridy A, ‘The Price of Closing the “Value Gap”: How the Music Industry Hacked EU Copyright Reform’ (2020) Vanderbilt Journal of Entertainment & Technology Law (22) 323, 353.

[24] Priora G, ‘Catching sight of a glimmer of light: Fair renumeration and the emerging distributive rationale in the reform of EU copyright law’ (2019) Journal of Intellectual Property, Information Technology and Electronic Commerce Law 10(3) 330, 332.

[25] Quintais JP (n 33), 19.

[26] Quintais JP (n 33), 19.

[27] Dr Malte Engeler (n 57). See also Romero MF, ‘“Upload Filters” and Human Rights: Implementing Article 17 of the Directive on Copyright in the Digital Single Market’ (2020) 34 International Review of Law, Computers & Technology 153.

[28] Quintais JP (n 33), 15.

Other Sources:

Graham Smith, Internet Law and Regulation (5th edn, Sweet & Maxwell 2020)

EU Policy on Copyright (Shaping Europe’s Digital Future)

Music industry goes to war with YouTube