Collective Rights Management: multi-territorial licensing and self-regulation

Posted: April 2, 2014

The Council of the European Union has approved and adopted a new Directive on the collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market (the Directive).1

The new Directive aims to make it easier for online providers to obtain licences to stream music in more than one EU country, to stimulate the development of EU-wide online music services for consumers and to ensure that artists’ rights are better protected (including that they receive adequate royalties promptly).

At national level, in a related move, secondary legislation to regulate collecting societies was laid before the UK Parliament in February 2014 (and, with minor amendments, again at the beginning of March 2014). The draft legislation, to be known as the Copyright (Regulation of relevant licensing bodies) Regulations 2014 (the Regulations)2, has now been approved and will come into force on 6 April 2014. The Regulations are intended to support a system of self-regulation by collecting societies (called “relevant licensing bodies” in the Regulations) by giving Government powers to penalise any gaps in self-regulation.

Background

In May 2010, the European Commission published “Europe’s Digital Competitiveness Report”, which was an analysis of digital competitiveness throughout Europe and the basis for the Commission’s “Digital Agenda for Europe”, which it launched alongside the Report. The Digital Agenda set out a course to maximise the social and economic potential of information and communications technology (ICT), most notably the internet, in order to boost Europe’s economy. It identified seven obstacles to the proper exploitation of ICT and set out key actions to tackle the problem areas, including opening up access to content through introducing a framework Directive on collective rights management and a Directive on orphan works that would facilitate their digitisation and dissemination throughout the EU.

The UK Regulations, which were drafted against the backdrop of the proposed Collective Rights Management Directive, result from the Enterprise and Regulatory Reform Act 2013 (ERRA). The ERRA requires collecting societies to self-regulate, in the first instance, but gives the Government power to make Regulations in order to remedy and, where warranted, penalise gaps in self-regulation. The Regulations have been updated to take account of feedback received from a consultation undertaken by the Intellectual Property Office in September/October 2013.

The Directive

Under the new Directive, online music service providers in the EU will be able to obtain licences from collective management organisations representing authors’ rights across borders. With licences covering more than one Member State, the idea is that service providers should find it easier to stream music services across the EU.

In order to ensure that the creators of music in all Member States have access to licences covering more than one country and to preserve cultural diversity, collective management organisations that do not themselves issue copyright licences for more than one country will be able to request another organisation to represent their repertoire. Under certain conditions, those organisations will be obliged to do so and will have to manage the repertoire they represent under the same conditions that they apply to their own repertoires.

All collective management organisations will also be required to ensure that artists receive appropriate remuneration for the use of their rights in good time. In general, the royalties will have to be distributed to artists as quickly as possible, and no later than nine months from the end of the financial year in which the relevant rights revenue was collected.

Rights-holders will also have a say in the decisions on the management of their rights and the freedom to select the collective management organisation of their choice. In order to ensure that rights holders’ rights are properly managed, collective management organisations will also have to comply with transparency and reporting requirements, as well as minimum rules on governance and on the collection and use of revenues.

Now that the Council has formally approved the Directive, it will enter into force 20 days after its publication in the EU Official Journal. Member States will then have 24 months to incorporate the Directive into national law.

The Regulations

The Government has stated that the Regulations should improve the efficiency of collective licensing and strengthen confidence in the operation of collecting societies, delivering benefits for members and users of collecting societies alike.

The main changes to the Regulations following the IPO’s consultation are:

  1. the ability to require a licensing body to modify only parts of a code of practice rather than having to compile a completely new code;
  2. a new condition that gives the licensing body an opportunity to amend its code of practice within 49 days after being notified that it does not comply with the specified criteria;
  3. the time available to a licensing body to submit a compliant code after a direction has been issued by the Secretary of State has been extended from 28 days to 49 days;
  4. clarification of the total amount payable in default fines (£50,000); and
  5. the addition of a new appeal right that allows an appeal to be made against the imposition of a financial penalty as well as the amount.

The draft Regulations were subject to the “affirmative” approval procedure, meaning that they only became law after being debated and approved by both Houses of Parliament. This has now occurred and, as noted above, the Regulations will come into force on 6 April 2014.

Comment

The proposal for the Collective Rights Management Directive originally attracted widespread criticism. It was, however, approved by the European Parliament with remarkable unanimity (640 votes in favour and only 18 against, with 22 abstentions). It has also been welcomed by collecting societies, such as PRS for Music. In PRS’s view, the Directive will “help collective management organisations and their members play their role in a more integrated, efficient and valuable single market for licensing music and audiovisual services in Europe”. PRS believes that high standards of transparency are important not just for digital online markets, but for national licensing as well.

The European Commission says that the Directive came about because collective management organisations needed to modernise their operations to meet the challenges of a fast-evolving digital economy. One of the underlying problems was insufficient transparency and control of the way collective management organisations were managed. The Commission considered that it was necessary for them to provide a more efficient service to rights-holders and users (service providers), involving: better collection and redistribution of revenue; accurate invoicing; and more granting of multi-territorial licences for aggregated repertoire.

The outcome of the Directive, according to Rapporteur Marielle Gallo, should be to allow “a Lithuanian singer to choose what collective management organisation he wants to hand over his repertoire”.

The Directive has also been welcomed by the digital industry as a whole with the European Digital Media Association, DigitalEurope, Bitkom, EuroISPA, the European Competitive Telecommunications Association, the Coalition for a Digital Economy, and Mixcloud issuing a joint statement saying: “The proposed Directive aims to establish important principles to ensure that collecting societies efficiently administer the rights and represent the interests of their members and should help improve the efficiency of the licensing process as well as promote new services for the benefit of European consumers, creators, and cultural diversity”.

It is hard to find any dissenting voices. One criticism raised during the Parliamentary debate, however, was that by allowing Member States to decide if they oblige third country platform operators to follow the rules, this could be “an open door for foreign direct distributors”.

As for the UK Regulations, the recommendations for codes of practice were made by Professor Hargreaves in his Review of Intellectual Property and Growth in the light of concerns about insufficient transparency with regard to the administration of collecting societies, made more acute by the extended collective licensing proposals, and also a desire to present the conduct of UK collecting societies as a gold standard for Europe. The Government says that UK collecting societies now have “an excellent opportunity to showcase best practice in Europe”.

Eleanor Steyn, Associate, Michael Simkins LLP

Article written for Entertainment Law Review

  1. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/intm/141081.pdf and http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=PE%20115%202013%20INIT
  2. http://www.legislation.gov.uk/ukdsi/2014/9780111110485