Towards more efficient rights clearance models

Today was the last day that interested parties could submit their reactions to the public consultation on the review of the EU copyright rules. The consultation was launched by the European Commission on 5th December 2013; the original deadline for input was then set at 5th February, but this deadline was later extended by one month.

The title of the consultation document gives the impression that the Commission is considering a review of the whole set of European copyright rules. However, this turns out not to be the case. The starting point is that the current regulatory framework should not be touched; the objective is merely to ensure that it “stays fit for purpose in the digital environment”.

With this in mind, it is no surprise that the consultation is limited to new forms of distribution and use which result from digital technology and the Internet. In the introduction paragraph of the consultation document it is stated that the consultation focuses on what the legislator should do “to ensure that the system of rights, limitations to rights and enforcement remains appropriate and is adapted to the new environment”. In the consultation document, the Commission refers to a whole bunch of policy documents, statements and actions (for example, its “Communication on Content in the Digital Single Market”, its “GreenPaper on copyright in the knowledge economy” (which was followed up by a Communication on the same topic, its “Green Paper on the online distribution of audiovisual works”, its “Content Online” initiative, its stakeholder dialogue on “Licenses for Europe” (which failed to “reach consensus on either the problems to be addressed or on the results”), the Directive on Collective Rights Management, the Directive on Copyright in the Information Society, the Directive on the legal protection of computer programs, the Directive on the legal protection of databases, the Satellite and Cable Directive, the Rental and Lending Rights Directive, the Enforcement Directive, the Directive on the term of copyright protection, the Orphan Works Directive, the 2011 Memorandum of Understanding on key principles on the digitisation and making available of out of commerce works and market-led initiatives supported by the Commission, such as the Linked Content Coalition and the Global Repertoire Database, and so on and so forth.

On top of the above European legislation and policy initiatives, all 28 EU Member States have their own interpretations of the European rules plus they can uphold their own national copyright regimes as the European legislator did not aim at full harmonisation.

All of this hampers the development and the roll out of new services and new forms of distribution and use which result from digital technology and the Internet. Many issues end up in court and are pursued all the way through up to the highest instance. Investments made before a final decision in any of those cases are risky. The complexity of the system makes it virtually impossible to act without  proper legal advice of highly specialised lawyers and without involving intermediaries such as collective rights management organisations.

It is clear from the above that Europe needs a more efficient coyright and rights clearance system; a system which is less legalistic and less bureaucratic. An economic model needs to be developed; a model which remedies the current inefficiencies and restricts the number of rights clearance transactions to the bare minimum.

X-Media Strategies has been involved in such an exercise before in the vertical value chain of production and distribution of audiovisual content. In The Netherlands the film and television producers, the public and private broadcasters and the operators of distribution platforms decided to work together on the development of an economic model for rights clearance which would replace the legal model. The reason was that the legal model had led to so many discussions, court cases and unclarities that it had started to hamper the development and roll out of new, inoovative services and this had to be stopped.

A similar initiative should be taken at the European level and X-Media strategies intends to take the lead in this. As a first step towards more efficient rights clearance mechaninsms in Europe, X-Media Strategies will support the parties in the vertical value chain of content production and distribution in developing options for economic rights clearance models which will facilitate the rollout of new and innovative audiovisual media services across the internal market.

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The Pirate Bay unblocked in NL

Internet Service Providers Ziggo and XS4ALL do no longer have to prevent that their subscribers access The Pirate Bay.

On 28th January 2014, the Court of Appeal in The Hague (Den Haag) in The Netherlands overruled the earlier decision by the District Court of The Hague. Following a petition by an anti-piracy organisation by the name of Brein, the District Court had decided that internet service providers Ziggo and XS4ALL infringed copyright rules by facilitating that their subscribers could access content which was made available by The Pirate Bay without the express permission of the rights holders. Therefore it had ordered both companies to block access to The Pirate Bay.

The Court of Appeal, however, considered that the imposed blockade was ineffective and therefore did not contribute to the objective aimed at, namely to protect intellectual property rights. The Court of Appeal took account of the fact that Ziggo et al. did not engage in any infringements and decided that the principle of proportionality brings with it that therefore the degradation of the freedom of entrepreneurship of Ziggo et al. is not justified.

The decision entails an interpretation of EU copyright rules. According to the Court of Appeal, neither Article 8 paragraph 3 of the EU Directive on Copyright in the Information Society, nor Article 11 3rd sentence of the EU Enforcement Directive envisage the situation in which a third party using the services of intermediaries (such as Ziggo et al.) (illegally) facilitates/encourages copyright infringement by others, but does not commit infringements itself.

It so happens that the interpretation of Article 8 paragraph 3 of the EU Directive on Copyright in the Information Society is currently under consideration by the European Court of Justice (Case C-314/12, UPC Telekabel Wien GmbH vs Constantin Film Verleih GmbH and Wega Filmproduktionsgesellschaft GmbH). In this case, the Court addresses the question of whether it is at all possible to issue (on the basis of this provision) a prohibition order targeting an internet service provider which does not provide internet access to the operator of a web site who commits large scale infringement on copyright, but only to the usersits subscribers who can decide individually to access the web site in question. According to the Advocate General, in his Opinion of 26 November 2013, imposing such an Order is not per se disproportionate.

Brein decided to take the case to the High Court (Hoge Raad). The High Court will not look at the merits of the case, but will decide whether the lower courts applied the law in a correct way. In doing so, it will need to take account of the Decision by the European Court of Justice which will have been published by the time the High Court of The Netherlands will decide.

An (unofficial) English translation of the decision by the Court of Appeal of The Hague is available here (pdf).



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Disruption by WhatsApp: New Opportunities and Challenges

New opportunities and challenges for both the electronic communications business and regulators: All electronic communications services (radio, television, on demand content services, film, text messaging, voice telephony) are now  digital and can be stored, transported and delivered in data packages over the Internet using the internet protocol. At the same time, all competing electronic communication infrastructures can now deliver those data packages to end users (a development already predicted in 2004 by Ad van Loon, Founder & Owner of X-Media Strategies in an article on the end of the broadcasting era). On 24 February 2014, at the Mobile World Congress in Barcelona, Jan Koum, Founder of WhatsApp announced that WhatsApp will start offering voice telephony services in the second calendar quarter of this year. The service will be based on the internet protocol and therefore users will need mobile data access (instead of access to a GSM or other type of mobile network which is specifically designed for and dedicated to voice calls).

The large telecom groups already experienced an unexpected disruption of their revenue-generating text messaging services when WhatsApp was introduced. Now they fear that WhatsApp (with the power of Facebook behind it) will also succeed in offering global low cost mobile voice telephony services, which will affect the revenue-generating models of the telecom groups in this market as well. The cable industry, the film industry and the music industry have been experiencing similar disruptions.

Mr Koum reached out to the telecom groups indicating that WhatsApp is ready to work with them to develop new business models which would move customers to subscription plans and tariffs based purely on the use of data (regardless of the services included in those data). He said that WhasApp is already experimenting with the new reality in Germany where it intends to offer a co-branded service with KPNs E-Plus.

The cable industry was already warned for similar disruptions in the video market in 2006 (Arthur D. Little: ‘Next Generation Networks in Europe. Broadband in 2011 and beyond‘) and 2007 (Bain & Company: ‘The Digital Video Consumer. Transforming the European Video Content Market‘) and is therefore better prepared to meet the challenges.

Regulators will need to realise that all fixed and mobile electronic communications infrastructures will need to be capable of offering two-way high speed IP based data transfer services. This means, for example, that frequency spectrum should no longer be assigned on the basis of the types of services rendered (GSM for mobile voice telephone; 3G/4G for data; DVB for video; DAB for audio; etc.) but rather on the basis of the capability of providing the widest possible coverage and the highest possible transfer speeds of IP-based data packages. This will have severe implications for mobile operators and broadcasters and poses an enormous challenge to policymakers and regulators.

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Media Law not to be used by Member State to circumvent EU regulatory framework for electronic communications

On 29 January 2014, the District Court in The Hague (Den Haag) in The Netherlands decided to render two provisions of national law ineffective for reason that the legislator, by adopting those provisions, violated the rules of the EU regulatory framework for electronic communications.  The alleged provisions require that cable operators make available the channel package which they offer to their subscribers, for resale purposes, to third parties (their competitors), in order to promote competition on their cable systems and give consumers more choice.

The State of The Netherlands relied heavily on Article 1 paragraph 3 of the 2002 Framework Directive for electronic communications (as amended in 2009), which stipulates that “This Directive as well as the Specific Directives are without prejudice to measures taken at Community or national level, in compliance with Community law to pursue general interest objectives, in particular relating to content regulation and audio-visual policy”.

The State argued that the contested provisions pursued specific objectives of audio-visual policy and that the purpose of assessment is that consumers can choose from whom they purchase their television package. This freedom of choice, according to the State, should lead to competition, lower prices and better services.

The court, however, considered that in the present case, the contested provisions could not be seen as an audio-visual policy, now that those provisions were only intended to achieve that a standard package was forcefully offered for resale. This forced resale, according to the court, would not result in more content for the consumer to choose from: “At most, consumers can purchase the same standard package from a competitor for a lower price”.

Furthermore, the court recalled that the aim of the EU regulatory framework for electronic communications is progressively to reduce ex-ante sector specific rules as competition in the markets develops and ultimately, for electronic communications to be governed by competition law only. Promoting competition and consumer interests are, according to the court, “goals which EU competition law itself pursues and guarantees”; as the EU regulatory framework for electronic communications aims at full harmonization, the national legislator on this point has no powers anymore.

A further attempt by the State (supported by Tele2) to uphold the contested provisions was based on Article 31 of the Universal Service Directive (the “Must Carry” provision). The State and Tele2 argued that the resell obligation could be upheld on the basis of the “must carry” rules. The court, however, denied this, reasoning that Member States may only impose such obligations if they are necessary to meet general interest objectives as clearly defined by each Member State and they are proportionate and transparent. In the present case, according to the court, the contested provisions do not contain “must carry” obligations, but rather a “must resell” obligation, which goes beyond the purpose of the “must carry” rules, which merely intend to secure the receipt of the intended programme package by the end users. In addition, the court considered that the contested provisions do not comply with the requirement of Article 31 that “must carry” obligations must be in the general interest, since the contested provisions only pursue an economic interest.

Interestingly enough, in a similar case in Belgium, the authorities managed to uphold the resell obligation which they imposed on a number of cable operators; even against the opinion of the European Commission.

For an English translation of the judgement of the District Court in The Hague (Den Haag), click here (pdf).

For information of the situation in Belgium, click here (pdf).

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U.S. takes steps to enforce ‘Safe Harbour Agreement’

On 21st January 2014 the U.S. Federal Trade Commission (FTC) announced a settlement with 12 companies that allegedly falsely claimed to comply with the “Safe Harbour” privacy protection framework. Among those companies are Level 3 Communications, LLC (one of the six largest ISPs in the world), BitTorrent, Inc. (provider of a peer-to-peer (P2P) file sharing protocol) and DataMotion, Inc. (provider of a platform for encrypted email and secure file transport).

The settlement consists of draft consent agreements which are now subject to public comment for 30 days (until 20th February 2014), after which the FTC will decide whether to make the proposed consent orders, which are part of the agreements, final. For the Web links to send comments in electronic form, click here.

Under the “Safe Harbour” Agreement between Europe and the U.S., U.S. organisations respecting the U.S. standards for privacy protection are deemed to meet the EU “adequacy” standard and consequently nothing stands in the way of personal data transfers between the EU and the U.S.

See also:

EU-U.S. exchanges of personal data: “Lack of transparency and enforcement on the U.S. side”

Future of the “safe harbor” arrangement for personal data transfers to the U.S.

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EU-U.S. exchanges of personal data: “Lack of transparency and enforcement on the U.S. side”

In a speech in the European Parliament on 15th January 2014 on the “Future of the Safe Harbour Agreement in the light of the NSA affair”, Viviane Reding, Vice-President of the European Commission and EU Justice Commissioner accused the U.S. of a “Lack of transparency and enforcement” of the measures agreed upon. Ms Reding recalled that the aim of the “Safe Harbour” scheme is “to make sure that our rights are protected at all times according to EU standards, while securing the business advantages which flow from the ability to transfer personal data to the U.S. for processing there”.

She told the European Parliament that the Commission is addressing the deficiencies in the Safe Harbour and referred to the Commssion’s analysis of the regime which was published on 27 November 2013 and which concluded that the Safe Harbour must be made safer.

In her speech to the European Parliament, Ms Reding said:

“While the Safe Harbour decision allows limitations on protection when justified by national security, they must comply with the principles of proportionality and necessity. Massive collection of data by the authorities on anybody, without suspicion goes beyond what is proportionate and necessary.”

For background information on the position of the European Parliament and on the Safe Harbour regime, click here.

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