Explanatory Memorandum to COM(2012)372 - Collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2012)372 - Collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online ... |
|---|---|
| source | COM(2012)372  |
| date | 11-07-2012 |
The present proposal for a directive aims to put in place an appropriate legal framework for the collective management of rights that are administered by collecting societies on behalf of rightholders by providing for rules ensuring the better governance and greater transparency of all collecting societies and also by encouraging and facilitating the multi-territorial licensing of the rights of authors in their musical works by collecting societies representing authors.
A licence is required from the relevant holder of any copyright or related right where any service is provided which includes the exploitation of the protected work of an author e.g. a song or musical composition or other protected subject matter, such as a phonogram or performance. Such services may be provided offline, such as showing a film in a cinema or playing music in a concert hall, but also increasingly online. A licence is required from all the different rightholders (authors, performers, producers). In some sectors, licences are most often granted directly by individual rightholders (e.g. film producers), in other sectors, the collective management of rights plays a very important role, in particular of authors' rights in musical works. Certain forms of exploitation also rely particularly on collective management e.g. the performers and record producers' remuneration rights for the broadcasting and public performance of phonograms.
Rightholders entrust their rights to a collecting society which manages rights on their behalf. They also provide services to rightholders and users which include granting licences to users, administering the rights revenue, payments due to rightholders and enforcing the rights. Collecting societies play a very important role, in particular where negotiations with individual creators would be impractical and entail prohibitive transaction costs. They also play a key role in the protection and promotion of the diversity of cultural expressions by enabling the smallest and less popular repertoires to access the market.
Action is considered necessary in two areas.
First, collective rights' management in all sectors needs to adapt in terms of the service provided to members and users as regards efficiency, accuracy, transparency and accountability. An excessively slow pace of modernisation negatively impacts on the availability of new offerings for consumers and service providers, as innovative services especially in the online environment are being hampered. To ensure the adequate provision of services using works or other subject-matter protected by copyright and related rights in the internal market, collecting societies should be led to adapt their methods of operation for the benefit of creators, service providers, consumers and of the European economy as a whole. As societies license rights on behalf of national and foreign rightholders, their functioning has a fundamental impact on the exploitation of those rights across the internal market. The functioning of some of them has raised concerns as to their transparency, governance and the handling of rights revenue collected on behalf of rightholders. Notably, concerns have been expressed with regard to the accountability of certain societies to their members in general, and to the management of their finances in particular. A number of collecting societies still have to meet the challenge of adapting to the realities and needs of the Single Market.
Second, the development of a Single Market for cultural content online has led to calls for changes to copyright licensing, notably in the licensing of the rights of authors in musical works as online music service providers face difficulties in acquiring licences with an aggregated repertoire for the territory of more than one Member State. While a number of factors contribute to the territorial fragmentation of online music services, including the commercial choices of providers, the difficulties of obtaining multi-territorial licences should not be underestimated. This situation leads to fragmentation of the EU market for these services, thereby limiting the provision of online music services by online service providers and as a result authors' musical works have not been as widely licensed or properly remunerated, as they could have been. This fragmentation also prevents consumers from enjoying the widest possible access to the considerable diversity of musical repertoires. Whilst in other areas collective rights management has not given rise to any difficulties that need to be addressed in this context, the collective management of authors' rights in musical works needs to be addressed. Tackling this situation is crucial to stimulate the legal offer of music online in the EU.
This proposal therefore aims to: (a) improve the standards of governance and transparency of collecting societies so that rightholders can exercise more effective control over them and help improve their management efficiency, and (b) facilitate the multi-territorial licensing by collecting societies of authors' rights in musical works for the provision of online services.
This proposal is presented in the context of the Digital Agenda for Europe i and the Europe 2020 Strategy aiming for smart, sustainable and inclusive growth i. In its 'Single Market Act' i the Commission identified intellectual property as one of the areas in which action is required and underlined that, in the internet age, collective management must be able to evolve towards more transnational, possibly EU-wide models of licensing, covering the territories of multiple Member States. In its Communication 'A Single Market for Intellectual Property Rights' i the Commission announced that it would be proposing a legal framework for the collective management of copyright and related rights. The importance of this legislative proposal was also highlighted in the Commission's 'European Consumer Agenda'.[5]
Article 167 of the TFEU requires the Union to take cultural aspects into account in its action, in particular to respect and promote the diversity of its cultures.
Technology, the fast evolving nature of digital business models and the growing autonomy of online consumers, all call for a constant assessment as to whether current copyright rules set the right incentives and enable rightholders, users of rights and consumers to take advantage of the opportunities that modern technologies provide. This proposal should not be seen in isolation but as part of a set of measures proposed or to be proposed by the Commission, as appropriate, in order to facilitate the licensing of rights and, more generally, access to attractive digital content, in particular in a cross-border context. Besides addressing the functioning of collecting societies in the context of this proposal, the Commission is also considering if other measures are required to facilitate licensing in general whether done by individual rightholders, those to which the rights have been transferred, or by collecting societies. This reflection encompasses the issue of the territoriality of rights and its effects in the licensing of certain content or services.
Also in the context of the Digital Agenda for Europe, the Commission Communications “A Single Market for Intellectual Property Rights” and 'A coherent framework for building trust in the Digital Single Market for e-commerce and online services' i and the follow-up to the 'Green Paper on the online distribution of audiovisual works in the European Union' i, the Commission is carrying out in-depth legal and economic analysis as regards the scope and functioning of copyright and related rights associated with internet transmissions in the Single Market, including whether the current exceptions and limitations to copyright granted under the Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society i need to be updated or further harmonised at EU level.
While some of the existing directives in the field of copyright i contain references to the management of rights by collecting societies, none of them addresses the modus operandi of the societies as such.
Commission Recommendation 2005/737/EC on the collective cross-border management of copyright and related rights for legitimate online music services i invited Member States to promote a regulatory environment suited to the management of copyright and related rights for the provision of legitimate online music services and to improve the governance and transparency standards of collecting societies. Being a Recommendation, it was non-binding and its voluntary implementation has been unsatisfactory.
This proposal complements Directive 2006/123/EC of 12 December 2006 on services in the internal market i which aims to create a legal framework to ensure the freedom of establishment and the free movement of services between the Member States. Collecting societies are subject to Directive 2006/123/EC as providers of collective management services.
The proposal is important for the protection of copyright and related rights. The Berne Convention for the Protection of Literary and Artistic Works, the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, the World Trade Organisation Agreement on Trade-Related Aspects of Intellectual Property Rights, the World Intellectual Property Organisation Copyright Treaty and the World Intellectual Property Organisation Performances and Phonograms Treaty are key international instruments in this respect. The United Nations Educational Scientific and Cultural Organisation Convention on the protection and promotion of cultural expressions which expands the obligation of the European Union at international level, also recalls the importance of intellectual property.
Contents
- RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENT
- LEGAL ELEMENTS OF THE PROPOSAL
- BUDGETARY IMPLICATION
- 1.1. Grounds for and objectives of the proposal
- 1.2. General context
- 1.3. Existing provisions in the area of the proposal
- 1.4. Consistency with other policies
- 2.1 Public consultation
- 2.2 Collection and use of expertise
- 2.3 Impact assessment
- 3.1. Legal basis
- 3.2. Subsidiary and proportionality
- 3.3. Choice of legal instrument
- 3.4. Explanation of the proposal
- 3.4.1. Scope and definitions
- 3.4.2. Collecting societies
- 3.4.3. Multi-territor ial licensing by authors' collecting societies of online rights in musical works
- 3.4.4. Enforcement measures
- 3.4.5 Fundamental rights and specific recitals
The proposal builds on an extensive round of dialogue and consultation with interested parties, including authors, publishers, performers, producers, collecting societies, commercial users, consumers and public bodies.
It takes into consideration the views expressed in a public consultation on 'Content Online',[12] which aimed to promote further thinking and debate about possible European responses to the challenges of the digital 'dematerialisation' of content, including easier and quicker rights clearance structures while ensuring fair and adequate remuneration for rightholders. The consultation specifically addressed the governance and transparency of collecting societies and the cross-border management of rights for online music services. Several respondents felt that aggregating different music repertoires would simplify rights clearance and licensing. A number of authors' associations, publishers and commercial users favoured further reflection on the governance and transparency of collecting societies. Consumers' associations generally supported a regulatory initiative (e.g. by means of a binding legislative instrument).
In 2010 the Commission consulted collecting societies and online music service providers. It also organised a public hearing i on the governance of collective rights management in the EU, attended by almost 300 stakeholders. These consultations confirmed what had been identified as deficiencies in the collective management of rights and the need to improve the governance and transparency standards of collecting societies and to create a framework for facilitating the online licensing of musical works.
There was no use of external expertise.
The impact assessment examines two groups of options to deal with: (a) issues pertaining to the insufficiency of governance and transparency standards applied by certain collecting societies, often resulting in weaknesses in their financial management; (b) issues stemming from the lack of preparedness of certain authors' collecting societies to grant online multi-territorial licences in view of the requirements associated with this kind of activity and the perceived legal uncertainty, making the repertoire aggregation of musical works more difficult.
The policy options regarding the governance and transparency of collecting societies are as follows:
- Retaining the status quo (A1), relying on the market and peer pressure (including self-regulation) would not solve the cross-border issues (e.g. control of royalty flows).
- Better enforcement (A2) of existing EU law and more consistency at national level in applying its principles would not harmonise the operating conditions of collecting societies. Issues outside the scope of existing principles would remain unsolved.
- The codification of existing principles (A3) would reflect in legislation the principles that have emerged from the case-law of the Court of Justice, the Commission's antitrust decisions and Recommendation 2005/737/EC but it fails to capture more recently identified problems in relation to financial transparency and control by rightholders.
- A governance and transparency framework (A4) would codify the existing principles and provide a more elaborate framework of rules on governance and transparency, increasing the possibilities of control over collecting societies.
The following policy options were examined to address the complexities of the collective licensing of authors' rights in musical works for online uses:
- Under the status quo (B1), the internal market would remain fragmented as rights licensing for online services would continue to be complex and burdensome.
- The European Licensing Passport (B2) would foster the voluntary repertoire aggregation for online uses of musical works at EU level and the licensing of rights through multi-territorial licensing infrastructures. It would lay down common rules for all collective licensors throughout the EU and would create competitive pressure on societies to develop more efficient licensing practices.
- Parallel direct licensing (B3) would allow rightholders to conclude direct licences with users, without having to withdraw their rights from their collecting societies. It would promote competition among societies but would neither establish a set of minimum common rules for licensors nor necessarily produce repertoire aggregation.
- Extended collective licensing and country of origin principle (B4) would establish the presumption that each collecting society has the authority to grant 'blanket' licences for online uses covering the entire repertoire provided that the society is 'representative'. This option would neither provide any incentive for collecting societies to become more efficient, nor simplify the multi-territorial licensing of rights (due to opt-outs from collective management which would often lead to repertoire disaggregation).
- A centralised portal (B5) would enable collecting societies to pool their repertoire for multi-territorial licensing in a single transaction, coordinated through the portal. This option raises significant concerns as to its compatibility with competition law.
After carefully weighing up the advantages and disadvantages of each of the approaches, options A4 and B2 were retained.
The proposal is based on Articles 50(2)(g), 53 and 62 TFEU as facilitating the free provision of services. The introduction of key governance and transparency standards in collecting societies would protect the interests of members and users and also thereby facilitate and encourage the provision of collective management services across borders, in particular as societies usually manage rights of rightholders from other Member States (including via the so-called representation agreements that collecting societies have traditionally concluded with collecting societies established in other Member States) and cross-border royalty flows. Moreover, addressing the fragmentation of rules applicable to collective rights management across Europe will facilitate the free movement of all those services which rely upon copyright and related right-protected content. Notably, taking action to facilitate the granting of multi-territorial licences to online service providers will substantially ease the distribution of and the access to such musical works online.
The EU action is necessary under the principle of subsidiarity (Article 5 i TFEU) as the legal framework at both national and EU levels has proved to be insufficient to address the problems. The Union has already enacted legislation which harmonises the principal rights of rightholders that are managed by collecting societies i and that the management of those rights in the internal market should take place in a comparable, effective and transparent manner across national borders. Moreover, the objectives of the proposed action cannot be achieved sufficiently by Member States and could thus be better achieved at EU level on account of the trans-national nature of the problems:
- As regards governance and transparency, a significant share of royalty collections in collecting societies derives from the non-domestic repertoire. The problem of members that do not have oversight of their society’s activities is more pronounced with respect to foreign rightholders. As they are not members of the relevant collecting societies, they have little insight into, and even less influence on, the decision-making process of societies acting on behalf of their own society. Protecting the interests of EU rightholders requires all royalty flows, and in particular cross-border flows, to be transparent and accounted for. It is unlikely that in the future Member States would ensure the transparency needed for rightholders to exercise their rights cross-border. EU intervention is the only way of ensuring the exercise of rights and, in particular, the collection and distribution of royalties in a consistent manner across the EU.
- Multi-territorial licensing for online uses of musical works is, by definition, of a cross-border nature. Rules intended to ensure the smooth functioning of multi-territorial licensing are accordingly better set up at EU level since Member States would not be in a position to draw up rules which would coherently address the cross-border activities of collecting societies.
The proposal respects the principle of proportionality (Article 5 i TEU), and it does not go beyond what is necessary to achieve the objectives pursued. The proposed rules on the governance and transparency codify, to a large extent, existing case-law of the Court of Justice in the context of decisions of the Commission taken in the area of antitrust i. They also take into account the size of collecting societies and allow Member States to exclude the smallest ones from certain obligations that may be disproportionate. The rules on multi-territorial licensing for online uses of musical works are limited to authors' rights and are the minimum principles needed to make an effective and modern licensing system workable in the digital era and to guarantee the repertoire aggregation, including niche and less-known musical works. Appropriate safeguards are provided in this regard: e.g. a collecting society will have the choice as to whether to carry out the multi-territorial licensing of its repertoire itself or to entrust other societies with it; also an author will not be locked in to a society which is unwilling either to grant multi-territorial licences directly or to allow another society to do so on its behalf.
The Commission proposes a Directive. This is in conformity with the requirements of Articles 50(2)(g), 53 and 62 TFEU. Also, a directive allows for the necessary flexibility as to the means to achieve these objectives and takes into account the fact that Member States have different approaches as regards the legal form of collecting societies and the way such societies are supervised.
Title I contains general provisions on subject matter ( Article 1 ), scope ( Article 2 ) and definitions ( Article 3 ). The Directive applies to: (i) the management of copyright and related rights by collecting societies, irrespective of the sector in which the societies are active (Title II),[16] and (ii) the multi-territorial licensing of online rights in musical works by authors' collecting societies (Title III). Titles I and II also apply to societies that carry out multi-territorial licensing under Title III.
Title II establishes organisational and transparency rules which apply to all types of collecting societies.
Chapter 1 provides for rules governing the membership organisation of collecting societies. Article 4 lays down certain requirements which should apply to the relations between collecting societies and rightholders. Article 5 ensures that rightholders can authorise the collecting society of their choice to manage rights and to withdraw such authorisation partially or completely. Societies should base their rules on membership and participation in the internal decision-making on objective criteria. ( Article 6) . Article 7 sets out the minimum powers of the general meeting of the members. Article 8 requires collecting societies to establish a supervisory function enabling their members to monitor and exercise control over their management, while respecting the different institutional arrangements in the Member States. Article 9 establishes certain obligations to ensure that societies are managed in a prudent and sound manner.
Chapter 2 sets out rules on collecting societies’ financial management:
- income collected as a result of the exploitation of the rights represented must be separated from the society's own assets and must be managed under strict conditions (Article 10) ;
- a collecting society must specify the applicable deductions in its agreements with rightholders and assure members and rightholders fair access to any social, cultural or educational services, if funded by deductions ( Article 11 );
- collecting societies must pay the amounts due to rightholders accurately and without undue delay and make efforts to identify rightholders ( Article 12).
Chapter 3 establishes the non-discrimination requirement for the management by a collecting society of rights on behalf of another society pursuant to a representation agreement ( Article 13 ). There is no possibility of deducting the amounts which are due to another society without the latter's express consent and payments should be made accurately to other societies ( Article 14) .
Chapter 4 requires collecting societies and users to conduct negotiations in good faith. Tariffs should be based on objective criteria and reflect the value of the rights in trade and of the actual service provided by the society ( Article 15 ).
Chapter 5 (transparency and reporting) requires the following levels of disclosure by collecting societies:
- information to rightholders on amounts collected and paid, management fees charged and other deductions made ( Article 16 );
- information to other collecting societies on the management of rights under representation agreements ( Article 17 );
- information to rightholders, other societies and users on request ( Article 18 );
- information made public on the organisation and functioning of the society ( Article 19 );
- annual publication of a transparency report, including governance principles and their implementation, financial statements, etc. ( Article 20 ).
3.4.3. Multi-territor ial licensing by authors' collecting societies of online rights in musical works
Title III establishes the conditions that an authors' collecting society must respect when providing multi-territorial licensing services for online rights in musical works ( Article 21 ):
- being able to process efficiently and transparently the data needed for the exploitation of such licences (e.g. identifying of its music repertoire, monitoring of its usage) by using a time-sensitive, authoritative database containing the necessary data ( Article 22 );
- being transparent as regards the online music repertoire it represents ( Article 23 );
- offering rightholders and other societies the possibility to correct the relevant data and to ensure their accuracy ( Article 24 );
- monitoring the actual usage of the works covered by the licences, being capable of processing usage reports and invoicing. Procedures to enable the user to challenge the accuracy of invoices (e.g. to avoid double invoicing) must be established. Appropriate industry standards, where available, should be used ( Article 25 );
- paying rightholders and other collecting societies without delay and provide them with information on works used and financial data related to their rights (e.g. amounts collected, deductions made) ( Article 26 ).
A collecting society may decide not to grant multi-territorial licences for online rights in musical works, but it could continue to grant national licences for its own repertoire and/or national licences for the repertoire of other societies through reciprocal agreements. However, in order to ensure that repertoires can be easily aggregated for the benefit of music service providers who want to offer a service as complete as possible across Europe and for the benefit of cultural diversity and consumers at large, specific safeguards will apply to ensure that the repertoire of all societies have access to multi-territorial licensing:
- a collecting society may request another society granting multi-territorial multi-repertoire licences to have its repertoire represented on a non-discriminatory and non-exclusive basis for the purpose of multi-territorial licensing ( Article 28 ). The society receiving the request may not refuse if it is already representing (or if it offers to represent) the repertoire of one or more collecting societies for the same purpose ( Article 29 );
- following a transitional period, rightholders may grant licences (either directly or through another intermediary) for their own online rights if their collecting society does not grant multi-territorial licences and if it does not enter into one of the agreements mentioned above ( Article 30 ).
A society is allowed to outsource services related to the multi-territorial licences it grants, without prejudice to its liability towards rightholders, online service providers or other collecting societies ( Article 27 ). Title III must also apply to subsidiaries of collecting societies covered by the Title ( Article 31 ).
To achieve the degree of flexibility required to encourage the granting of licences to innovative online services (i.e. which have been available to the public for less than 3 years), collecting societies are allowed to grant such licences without being required to use them as a precedent for the purposes of determining the terms of other licences (Article 32). By way of exception, collecting societies do not need to comply with Title III when granting multi-territorial licences to broadcasters for the online use of their radio or television programmes containing musical works ( Article 33 ).
In Title IV collecting societies are required to make available to their members and rightholders complaint and dispute resolution procedures ( Article 34). Mechanisms should also be available to settle disputes on licensing conditions between users and collecting societies ( Article 35 ). Finally, certain types of disputes, in relation to multi-territorial licensing, between collecting societies and users, rightholders or other societies could be submitted to an independent and impartial alternative dispute resolution system ( Article 36 ).
Member States shall designate the appropriate competent authorities empowered to ( Article 39 ): (a) administer complaints procedures ( Article 37 ); (b) administer effective, proportionate and dissuasive sanctions ( Article 38 ) and (c) monitor the application of Title III ( Article 40 ). Article 39, however, does not impose on Member States to set up independent supervisors specifically dedicated to the oversight of collecting societies.
The proposal provides for effective safeguards regarding the application of fundamental rights as laid down in the Charter of Fundamental Rights of the European Union. The safeguards required from collecting societies as regards their governance and the conditions on the provision of cross-border multi-territorial licences for online rights in musical works would restrict the freedom of collecting societies to conduct a business, as defined in the Charter, compared to the existing situation. However, such restrictions would respect the conditions set out in the Charter, which provides that the exercise of the relevant freedoms may be limited, under certain circumstances. These restrictions are necessary to protect the interests of the members, rightholders and users and to set minimum quality standards for the exercise by collecting societies of their freedom to provide multi-territorial licensing services for online uses of musical works in the internal market.
Due to the complexity and scope of the proposal, Member States are required to transmit a correlation table of the provisions of their national law and the Directive.
The proposal has no impact on the European Union budget.