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Posted on Thursday November 2, 2017

Updated on Monday November 6, 2023

02/11/17 EU Copyright reform update

European Council doubles down on extended collective licensing, abandoning the idea of a digital single market for cultural heritage.

More than a year after the European Commission published its proposal for a Directive on Copyright in the Digital Single Market (DSM directive), the proposal continues to be discussed both in the Council and in the European Parliament. While the discussions in the European Parliament have recently slowed down to a crawl (the vote in the Legal Affairs committee is not expected before January), the discussions between the Member States in the Council are picking up steam: earlier this week, the Estonian Council presidency’s  consolidated compromise proposal was made public.

The compromise proposal contains an entire new chapter (chapter 1a - Measures to facilitate collective licensing’) that contains an a new article (art 9a - ’Collective licensing with an extended effect’). To anyone familiar with the Commission's proposal (and our criticism of the proposal) this addition will appear somewhat odd as the Commission's original proposal already relied on ’collective licensing with an extended effect’ as a mechanism that would allow cultural heritage Institutions to make out of commerce works (OOCW) from their collections available online.

So what exactly is going on here? Articles 7-9 of the Commission's proposal are aimed at enabling the cross border use of out of commerce works. This would allow cultural heritage institutions to make such works from their collections available online so that they can be accessed from everywhere within the EU. While we think that relying on extended collective licensing alone will not be sufficient to achieve this objective for all sectors and all types of work, we are happy with the ambition to solve this problem on an EU wide basis.

A legal basis for Extended Collective Licensing

By contrast, the newly proposed article 9a focusses on (existing) national extended collective licensing arrangements and would not have any cross border effects. Instead, it introduces provisions into the EU legal framework that would remove the legal uncertainty that currently surrounds the extended collective licensing arrangements that exist in a number of (mainly nordic) EU Member States:

A functioning copyright framework that works for all parties requires the availability of proportionate, legal mechanisms for the licensing of works. Systems such as extended collective licensing or presumptions of representation are a well-established practice in several Member States and can provide such solutions, [...] Given the increasing importance of the ability to offer flexible licensing solutions in the digital age, and the increasing use of such schemes in Member States, it is beneficial to further clarify in Union law the status of licensing mechanisms allowing collective management organisations to conclude licences, on a voluntary basis, irrespective of whether all rightholders have authorised the organisation to do so (Recital 28a + 29c of the Estonian Compromise proposal)

Last year's CJEU ruling in the Doke & Soulier case has illustrated that there is a real possibility that ECL arrangements can be declared illegal. This is problematic, as there can be no doubt that extended collective licensing arrangements can play an important role in enabling access to works that are otherwise very difficult to license:

In the case of some uses, together with the large amount of works involved, the transaction cost of individual rights clearance is prohibitively high compared to the commercial value of the use, and without effective collective licensing mechanisms transactions in these areas are unlikely to take place. Extended collective licensing and similar mechanisms have made it possible to conclude agreements in areas affected by this market failure where traditional collective licensing does not provide an exhaustive solution for covering all works and other subject-matter to be used. (Recital 28b of the Estonian Compromise proposal)

The Council’s proposed article 9a would introduce provisions that provide a legal framework for national extended collective licensing arrangements. Compared to articles 7-9 of the Commission's proposal, it is more flexible, as it is not limited to the the use of out of commerce works by cultural heritage institutions. Instead, it would enable the licensing for all types of works which would allow CHIs to obtain licenses for collections that contain both in and out of commerce works (it would also cover extended collective licensing in other fields such as education).

At the same time, extended collective licenses based on this proposed article would also be much more limited as they would only apply domestically. This would mean that CHIs would need to geoblock access from other EU Member States to works that they make available online based on such licenses, which would work against the very idea of a Digital Single Market.

For cultural heritage institutions in Member States that have ECL systems in place or that are willing to introduce such systems, this is good news. Licenses based on the new systems will be much more flexible and allow them to digitize collections without having to spend resources to establish if works are out of commerce or not, and there will be a strong incentive for them to obtain licenses based on the newly proposed article 9a instead of making OOC works available relying on licenses based on articles 7-9.

Geoblocking or a Digital Single Market?

Unfortunately, this is where the problems with the new article start. By introducing the ability for more flexible domestic ECL systems, the Member States severely undermine the viability of the existing provisions aimed at allowing EU wide access to out of commerce works.

From our perspective, this would be a huge loss that goes directly against the objective of the directive to create a Digital Single Market including cross border access to the digitized cultural heritage collections of institutions all across the EU. The new proposal will likely lead to a situation where a lot of digital collections will only be available from within the Member State where the institution owning the collection resides.

The real losers of this would be be cultural heritage institutions in Member States that lack a robust collective management sector that is the prerequisite for extended collective licensing. Establishing a robust legal framework for ECL on the EU level should not happen at the detriment of those institutions. To prevent this, the Member States should make sure that the provisions for access to Out Of Commerce works contained in the Commission's proposal are strengthened.

As we have argued before, this requires both a simplification of the procedures foreseen in the Commission's proposal (which has been addressed in the Estonian compromise proposal), and the addition of an exception as a fallback mechanism for situations in which ECL does not work. Such a fall back exception (not included in the Council’s compromise proposal) would ensure that cultural heritage institutions have the ability to make all of their out of commerce works available even in situations where ECL does not provide a viable solution, because there are no collecting societies willing or able to issue such licenses.

The best of both worlds

The European legislator needs to provide a solution that allows cultural heritage institutions in the EU to make the out of commerce works contained in their collections available online. Wherever possible, on the basis of extended collective licenses; and where necessary, on the basis of a fallback exception.

Giving Member States additional space for extended collective licenses that are not limited to OOC works is a welcome addition, but in the light of the overall ambition to create a Digital Single Market, this should not be limited to domestic uses only. Fortunately, the Estonian compromise proposal keeps this perspective open: the last paragraph of the new article 9a includes a suggestion for the Commission to explore the ability to giving national ECL scheme a cross border effect:

the Commission shall, by 31 December 2020, submit to the European Parliament and to the Council a report on the use of such mechanisms [...] The Commission’s report shall be accompanied, if appropriate, by a legislative proposal, including as regards the cross-border effect of such national schemes.

This passage opens the pathway to a best case scenario in which cultural heritage institutions can draw on flexible extended collective licensing arrangements with cross border effect that are backed up by a fallback exception that allows CHIs to make available out of commerce works in situations where they cannot be included in such ECL arrangements.

The new Estonian presidency proposal contains two of the three building blocks for making this a reality. It is now up to the Member States to add the final building block: the addition of a fall back exception.