Art. 17 of the new Copyright Directive: What must rightholders and platforms do now?

by on 7. May 2019

Art. 17 (formerly Art. 13) of the new Copyright Directive resulted in a heated public debate, often reduced to the falsifying buzzwords “upload filter” and “internet censorship”, which in many aspects bypassed the issue. This article therefore analyses why the new regulation was necessary at all, which platforms are affected by the regulation, what effects it will have on these platforms, how the (dis)liability mechanism works and, above all, what steps now have to be taken on the part of the platforms and on the part of the rightholders in order to be prepared for the entry into force of the legislative amendments.

On 26 March 2019, after almost three years of advocating for a new copyright law adapted to the digital age, the European Parliament adopted the compromise proposal for a directive on copyright reform negotiated in a trialogue between the European Commission, the European Parliament and the Council of the European Union. The final hurdle, the Council’s approval of the final text of the Directive of the European Parliament and of the Council on Copyright and Related Rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC took place on 15 April 2019. Even with this last – otherwise purely formal – step, doubts had once again arisen as to whether the directive would be overturned at the last second.

After extensive protests in Germany and throughout Europe, Justice Minister Barley had left open until the end, which position Germany would take in the Council. A “no” vote by Germany would have completely questioned the reform once again, as Finland, Sweden, Poland, the Netherlands, Luxembourg and Italy had already positioned themselves against the reform, in the run-up to the vote. Belgium, Estonia and Slovenia abstained. In the end, Germany voted “yes”, but published a protocol declaration in which the German government advocates preventing “upload filters” wherever possible and safeguarding freedom of expression and user rights in particular. Publication of the Directive, which will eventually come into force, is expected in the course of May 2019. The Directive will then have to be implemented into national law by all Member States. Member States will be given two years to do so, probably until May 2021 at the latest. How exactly the transposition will take place is in principle left to the individual Member States, but the legal framework within which each Member State has to operate is set by the Directive. It is therefore worth taking a look at this framework now. This time should be used wisely by both rightholders and affected Internet platforms.

The most controversial and the subject of numerous demonstrations and protests, especially by young people, is Art. 17 (formerly Art. 13) of the Directive. This regulates the liability for copyright-protected works that are illegally uploaded to online services by Internet users. The prototype of the platform addressed by this regulation is the YouTube service. Susan Wojcicki, CEO of YouTube, had already addressed YouTube’s creative user community in a video message in autumn 2018 warning them of a disruption or major change to the hugely popular service through the introduction of the new platform liability principles. The subsequent discussion of the new regulations then took place primarily on the basis of distorted keywords such as “upload filter”, “Internet censorship”, etc. The new regulations were then used as a basis for the new regulations.

The following section will therefore provide a more detailed analysis of the background to the new regime (see paragraph 1), why it was necessary (see paragraph 2), which platforms are affected by the regime (see paragraph 3), what impact it will have on the platforms concerned (see paragraph 4), how the (dis)liability mechanism works (see paragraph 5), what exceptions start-ups can claim for themselves (see point 6), in what form user rights are observed (see point 7) and what information obligations exist (see point 8) and, above all, what steps are now to be taken by the platforms and by the rightholders (see point 9).

1. Background to the provisions of Art. 17

The background to the provisions of Art. 17 is a long-standing uncertainty regarding the classification of services, in which it is not the service provider itself that selects content and makes it available to its customers on a website; but rather, this step is taken over by Internet users. The directive now defines these services for the first time as so-called “Online Content Sharing Service Providers” (OCSSPs for short). With regard to the use of the copyrighted content offered via these services, the OCSSPs have so far taken the view that it is not the service itself but the uploading users (also known as “uploaders”) who make the copyright relevant use, since the initial storage and subsequent public access to the content is not made by the OCSSP but by the respective uploader. If rightholders such as publishers, music labels, collecting societies, photographers or film producers see their rights violated, they should take direct action against these uploaders.

However, it was not taken into account that OCSSPs often allow users to move around the platform completely anonymously. The traceability of the individual uploads therefore already failed due to the knowledge of the identity of the individual uploader. However, even if an identity could be established, there are tens of thousands of individual acts in a wide variety of jurisdictions, the prosecution of which by the sheer mass of them, is in practice, feasible for neither the rightholders nor for the petitioned courts. Even if the enforcement of rights is successful in individual cases, the acting uploaders are often not financially viable, so that the rightholder also has to bear the often considerable costs in the end, but does not receive a claim for damages granted by the court.

Ultimately, the profiters of the content publicly accessible on the services are in very few cases the uploaders; marketing is rather carried out by the OCSSPs – mostly through advertising revenues due to the very high number of visitors to such sites. As a result, the rightholders in these systems were neither involved in the commercialisation of their content by third parties – in this case uploaders and OCSSPs – nor were they given effective opportunities to end this. The so-called “value gap” was created.

2. Necessity of a new regulation

A clarifying new regulation became necessary at EU level, as the services and offers of the OCSSPs developed more and more into a serious competition and threat to the primary market, i.e. the licensed content services (such as television, radio, video-on-demand, video streaming or music streaming services). “online content sharing services, which provide access to a large amount of copyrighted content uploaded by their users, have become a major source of access to online content” is stated in recital 61 of the Directive. Uncertainty about the responsibility for making content available without consent and in particular without financial participation by rightholders “limits the ability of rightholders to determine whether and under what circumstances their works or other subject-matter will be used and their ability to obtain adequate remuneration for such use”

However, the reservation of consent to a use as well as the appropriate remuneration for a permitted use of the copyright of the authors is guaranteed by law. An earlier EU directive, the so-called Enforcement Directive, was supposed to help enforce these authors’ rights. However, this directive was limited to procedural questions and left out the central topic of substantive legal responsibility of the OCSSPs.

The aim of the new rules is thus to restore the balance between authors, rightholders and platform operators, since otherwise, in addition to mass copyright infringements, there would also be a distortion of competition for licensed online services.

3. Which platforms are affected?

Which platforms are covered by Art. 17 of the new Copyright Directive at all?

Art. 2 para. 6 defines OCSSPs as follows: “service provider for sharing content online means the provider of an information society service whose principal purpose or purposes is to store and make available to the public a large quantity of copyrighted works or other subject-matter uploaded by its users, organised and advertised for profit by that provider;”

Prerequisite are therefore:
– large quantities of copyrighted works
– uploaded by users
– Storage and access for the public
– organization of contents
– application for the purpose of making a profit

It should be noted here that the text of the Directive does not speak of large quantities of illegal content. Accordingly, not only platforms used predominantly illegally are addressees of the regulation, but all content providers who have their content delivered in a decentralized way by their users.
Recitals 62 et seq. also indicate that this refers only to ‘significant’ providers who actually compete for the same audience with licensed streaming services such as Spotify, Netflix or Audible.

The provisions of Art. 2 para. 6 expressly exclude non-profit online encyclopedias [e.g. Wikipedia], non-profit educational and scientific repositories [e.g. university repositories], development and distribution platforms for open source software [e.g. GitHub], providers of electronic communications services within the meaning of Directive (EU) 2018/1972 [e.g. WhatsApp, twitter], online marketplaces [e.g. eBay], cloud services provided between companies [e.g. Microsoft Cloud] and cloud services which enable their users to upload content for their own use [e.g. dropbox]; these are not service providers for sharing online content within the meaning of this Directive. According to recital 62, so-called “cyberlockers” are also explicitly excluded from the definition. It is questionable, however, whether the definition of these services in the Directive, which limits use to the personal use of uploaders, corresponds to the general understanding of the term “cyberlocker”. Cyberlockers” are often used internationally to describe services on which users store content and then make it available to the public via so-called link collections. Accordingly, the annual Review of Notorious Markets of the USA names a whole list of “cyberlockers” which, according to the definition given there, predominantly offer unauthorized content. But also the EU uses the term “cyberlocker” for copyright infringing services e.g. in its report IDENTIFICATION AND ANALYSIS OF MALWARE ON SELECTED SUSPECTED COPYRIGHT-INFRINGING WEBSITES or in the EU Counterfeit and Piracy Watch List. Due to the absolute anonymity guaranteed by the shared action system, such services are used for mass infringements and are the subject of repeated legal proceedings. Although these services, which allow mass sharing of copyright works, are often referred to as “sharehosters” in Germany, the choice of terms in the recitals of the Directive may be misleading. Pure private cloud storage services, which restrict access to the works to those who have stored them in their own cloud account instead of on a hard disk, should probably be excluded. However, the Commission may also have considered that the ECJ case law on “The Pirate Bay” has already removed the need for clarification with regard to cloud services, which are widely used illegally.

4. What effects does Art. 17 have on the platforms concerned?

Article 17(1) of the Directive now has the task of clarifying that a service provider itself performs an act of communication to the public or an act of making available to the public for the sharing of online content if it provides the public with access to works protected by copyright or other subject-matter uploaded by its users.

The operator of the platform therefore realizes the facts of the public reproduction himself and is basically responsible for this copyright-relevant act of use. The argumentation that this fact would be realized solely by the users (uploaders) and that the platform operator is merely a technical service provider no longer applies after this clarification.

The OCSSP must therefore in principle obtain the permission of the rightholders concerned before making the works publicly available, i.e. conclude license agreements providing for the possibility of making the works publicly available. As far as such a license agreement can be concluded, this agreement shall also contain a user license, so that the uploading users will no longer infringe any rights. However, this double licensing is only provided for if the uploader itself does not act commercially. Uploaders who operate their own content channels with a refund from the OCSSP must acquire a license from the rightholders in addition to the OCSSP itself.

If the OCSSP has made a serious effort to obtain a license, but the license is not granted (because in principle the rightholder is free to decide whether or not to grant a license), a special mechanism will intervene to balance the interests of the parties involved and place OCSSPs in a somewhat better position than traditional content providers, such as daily newspapers, radio stations, television channels, streaming services, etc., given the mass nature of the content and the decentralised nature of its delivery. (see also paragraph 5).

5. How does the (dis)liability mechanism work?

Insofar as a work protected by copyright is made publicly accessible elsewhere, this basically constitutes an interference with the exclusive right of the author according to § 19a UrhG, the so-called right of making it publicly accessible. The author can claim injunctive relief and damages from those who make their work publicly accessible without permission in accordance with §§ 97 i.V.m. 19a UrhG. These claims apply, for example, to website operators who take photos on their pages without the photographer’s consent, publishers who use a cover without asking the illustrator, or TV broadcasters who show excerpts from films without having licensed them. The copyright liability arises regardless of whether there is a certain knowledge of the works or an awareness of the illegality on the part of the work user.

Art. 17 para. 1 sentence 1 of the Copyright Directive now provides that OCSSPs are also affected by this liability if they make copyrighted content publicly available for profit via their services. However, the other paragraphs of Art. 17 contain a complicated mechanism which limits the liability of the OCSSPs in relation to other work users, insofar as the OCSSP has in any case sought licenses and cooperates with the rightholders to avoid infringements. This is to take account of the fact that these services involve mass deliveries of a large number of different types of works via personally unknown suppliers. The choice of works to be delivered is not made by the service, which thus faces the problem of reliably identifying the works that would need to be licensed for public availability in order to obtain the appropriate licenses. On the other hand, on services such as YouTube, identification is already taking place in order to index, organize and market works in a meaningful way.

The Directive now provides for the following procedure:
1. The OCSSP shall endeavor to obtain a license from the relevant rightholders for the works made publicly available on its service (Art. 17 para. 4 (a) of the Directive). For this purpose, an initial identification of the contents on the service as well as an assignment of the rights ownership to the respective contents must probably already take place (Art. 17 para. 1 sentence 2 of the Directive).
2. If a license is not granted, the rightholders concerned by any disclosure by the OCSSP must provide the OCSSP with relevant and necessary information on their works (Article 17(4)(b) of the Directive).
3. The OCSSP must then make best effort, in accordance with high industry standards of professional diligence, to ensure that the works for which the rightholders have provided relevant and necessary information to the providers of those services are not available (Article 17(4)(b) of the Directive). The measures to be taken in this respect are discussed under the buzzword “upload filters”.
4. To the extent that the OCSSP receives sufficiently substantiated information on the availability of certain works from the rightholders (i.e. a specific take-down notice), it must act immediately to block and remove them and also ensure that they are not uploaded back onto the service (so-called “stay-down”) (Art. 17 para. 4 (c) of the Directive).

Only if the OCSSP has demonstrably taken all these steps can it avoid liability for infringements originating from the upload of its users (Article 17(4) of the Directive). A further proportionality test is laid down in Article 17(5) of the Directive, according to which, when assessing whether the service has fulfilled its obligations, account must also be taken of the overall circumstances, such as the nature, public and scope of the service and the availability of appropriate means of preventing infringements and their costs. Smaller services with less financial resources and know-how will therefore be treated differently from large technology groups.

6. Lower requirements for start-ups

An exception to these high requirements is given to start-ups. This covers services which have been available in the Union for less than three years and whose annual turnover does not exceed EUR 10 million. These start-ups only have to react immediately to take down notices.

If the monthly number of visitors to these services exceeds 5 million (it is unclear whether there must be 5 million visitors from the Union – only in the recitals but not in the text of the Directive), the service must also provide for a “stay down”, i.e. prevent the same works from being uploaded again.

7. Observance of exceptions and restrictions

It may become a little more difficult for OCSSPs and rightholders regarding Article 17(7) of the Directive. It stipulates that the cooperation between OCSSPs and rightholders must not lead to so-called “overblocking”. In particular, as regards the use of works for quotations, reviews, critiques, cartoons, parodies or pastiche, Member States must provide for exceptions or limitations in national law. Whether this obligation will develop into a (user) right to these exceptions will depend to a large extent on the precise wording implemented by the Member States.
To safeguard these rights, OCSSPs must provide effective and expeditious complaint and redress mechanism (Article 17(9) of the Directive).

8. Information duties

The OCSSPs also have comprehensive obligations concerning information. On the one hand, the obligation to provide information exists vis-à-vis the rightholders pursuant to Art. 17 para. 8 of the Directive in connection with the use under any license agreements concluded and in connection with the measures taken to prevent infringements of rights. On the other hand, user organizations may also request information on the measures taken by the services. The latter is intended to provide transparency in connection with algorithm-based filter systems, which – according to the fears of many – could lead to a restriction of freedom of opinion and information.

9. What steps are to be taken now?

Immediately after the publication of the Directive (probably in May 2019), the EU Commission will now start dialogue discussions between stakeholders of online services, rightholders and user organizations in order to develop guidelines for the application of Art. 17. This seems necessary in order to ensure that the various national legal systems are transposed as uniformly as possible, since an online service does not, by its very nature, stop at the borders of a Member State and the aim of the Directive is precisely to create as uniform a law as possible.

In order to participate effectively in this dialogue, each industry of rightholders will first have to define for itself what “relevant and necessary” information needs to be provided in a meaningful way in order to clearly identify works and rightholders. In addition, it will also be useful to look at the existing technology for automatically searching the identified works on the services, and to evaluate whether there is still a need for development. There will still be some catching up to do here, especially with regard to the recognition of uses under exceptions and barriers. In addition, it will be necessary to discuss which information is actually necessary, because the fear here is that the services will develop into huge meta databases that collect information about any content usage behavior.

The OCSSPs will have to set up quite a number of new processes. Here, too, the first step will be to identify the works stored on their servers. Processes for mass licensing and billing of content will be necessary. In addition, systems need to be developed that effectively prevent infringements while taking exceptions and barriers into account, as much as possible. In addition, the designated complaint and redress mechanism must be implemented. In addition to the usually already established take-down procedures, processes for stay-down procedures must also be introduced. The OCSSPs in addition, must be able to meet their information obligations towards a large number of beneficiaries.

It is therefore necessary to make good use of the two years up to the entry into force of the regulations in national law, both on the part of the rightholders and on the part of the online services, in order to then be able to meet the requirements.

Dr. Ursula Feindor-Schmidt, LL.M., Certified Specialist for Copyright and Media Law, Partner at Law Firm Lausen Rechtsanwälte

The original article has been published in DR Digitalisierung und Recht and can be accessed here.