[Guest post] Lithuania transposes the DSM Directive

The IPKat is pleased to host this guest contribution by Katfriend Marijus Dingilevskis (Ellex), who reports and comments on the recent transposition, by Lithuania, of the DSM Directive [Katposts here].

Here's what Marijus writes:

Lithuania transposes the DSM Directive

by Marijus Dingilevskis

The Lithuanian Parliament adopted the law implementing the DSM Directive that was published in the Register of Legal Acts on 30 March last. Along with the DSM Directive, this law also implemented Directive (EU) 2019/789 on online transmissions of broadcasting organisations and retransmissions of television and radio programmes. The law implementing both directives shall enter into force on 1 May 2022, with a couple of exceptions.

Articles 15 and 17

Kats at least have fewer than 125 digits

Starting with the transposition of the press publishers’ right in Article 15 of the Directive, the Lithuanian law provides a definition of what is to be regarded as a ‘very short’ extract of a press publication.

Article 571(2)(3) of the law states that very short extracts are those which ‘consist of 125 digits or less, excluding the headers and spaces between text’, so this bold text long.

It is not indeed clear whether a quantitative definition of ‘very short extracts’ complies with the DSM Directive because it might limit the effectiveness of the press publishers’ rights granted under Article 15. As indicated at recital 58 of the DSM Directive, the use of these very short extracts should ‘not undermine the investments made by publishers of press publications in the production of content’. Hypothetically, if 125-digits-long extracts were enough to damage these investments (e.g., limit the traffic of consumers (what is quite unlikely) or similar), such quantitative definition of a ‘very short extract’ would not be in line with the directive.

Setting up a lump 125-digits’ limit might also be problematic from the perspective of balancing Article 15 with the rights of users of press publications, especially in the context of the freedom to receive and impart information. Article 15 is likely to be applied to news articles that might in some cases be important to the public. However, to use longer than 125 digit-excerpts from these articles, a news aggregator needs to obtain a licence. Arguably, licences might become too expensive for online services providers considering the benefits that they would get from the news aggregation service. Then, instead of buying licenses to use press publications, online services providers might just decide to suspend their news aggregation services or use strictly just 125-digits extracts.

But still, sometimes longer extracts which even include graphics or video/audio recordings might need to be used to appropriately inform the public. The quantitative definition of a ‘very short extract’ seems to limit the spread of such information. Imagine a case where someone uses 126 digits rather than 125 digits based on the importance of information to the public – would that really constitute an infringement of intellectual property rights? Moreover, what if these short extracts contained not only words but also graphics or video/audio recordings? Most probably, quantitative limitations (e.g., 125 digits limit), if applied strictly, would not pass a proportionality test since such an approach would limit the right to spread important information more than necessary no matter whether the news aggregator holds a licence to use the press publication or not.

Most probably, the Court of Justice of the European Union (CJEU) will have to consider and decide on whether a quantitative definition of a ‘very short extract’ appropriately implements Article 15 of the DSM Directive.

The new law implements Article 17 of the DSM Directive mostly in a copy-and-paste fashion. The same cannot be said about Article 18.

Stricter than expected Article 18

Article 18(1) of the DSM Directive states that ‘where authors and performers license or transfer their exclusive rights for the exploitation of their works or other subject matter, they are entitled to receive appropriate and proportionate remuneration.’ Article 18(2) points out that this provision of the directive should be implemented by considering the contractual freedom and a fair balance of rights and interests.

The Lithuanian law implements this provision by establishing a compulsory collective management mechanism. This resembles mandatory collective management whilst also having some important differences, as it will be explained below. Article 18, by itself, was not intended to establish a mandatory collective management of economic rights and was mostly aimed at a direct relationship between an author and their contractual counterpart (e.g., a publisher or producer), as indicated in recital 74 of the DSN Directive. This said, Member States enjoy sufficient freedom in implementing this provision. And the Lithuanian legislator, without doubt, used this freedom quite extensively.

Užupis Kat by Jonas Gelčy, Vilnius

The Lithuanian law includes multiple provisions stating that the authors’ right to remuneration for the use of their works is irrevocable and non-transferable, if their rights are administered by a collective management organisation (CMO). Any agreements saying otherwise are null and void. These changes are included into the law to protect the rights of authors and avoid situations when an author transfers their right to remuneration to a third party who (which) consequently is reimbursed by a CMO. The irrevocable remuneration, on the other hand, protects the rights of authors since users of their works will have to pay compensations mandatorily.

The given right does not introduce the mandatory collective management of all rights and uses; however, it creates a compulsory legal mechanism resembling the mandatory collective management if an author of a work transfers the management of their rights to a CMO. This means that the collective management of authors’ rights does not apply without a separate approval from an author or retroactively as with, for example, a right to rental of phonograms and films. An author must perform a separate action – to authorize the collective management of their rights. As soon as such authorization is obtained, the compulsory legal mechanism is switched on.

Then, there is no way they will not receive remuneration for all uses of their work because the use of their rights cannot be free of charge or transferred (e.g., to a publisher or producer). Considering some Lithuanian national case-law, this compulsory legal mechanism is likely to prevail in cases where the rights of an author are administered by a CMO, but they agree on different conditions of the use of their works with a particular user.

Against this background, due to irrevocable and non-transferable right to remuneration, the newly established mechanism of remuneration for the use of author’s works resembles the mandatory management of authors’ rights.

Moreover, when we look at the given changes from the perspective of the DSM Directive, it seems to create some unnecessary tensions. Take for example Article 15 of the DSM Directive. If an author of a press publication transfers their rights to a CMO rather than to their direct employer (contractor) media outlet, then all users of this piece of publication might have to pay their share into the collective management of these rights. This expands on the application of remuneration obligation (Article 18) to any users of press publications rather than regulating the direct relationship between an author and media outlet only.

Another important thing to note on Article 18 is that the law implementing the DSM Directive also changed a definition of a phonogram. Motivating on the fact that Article 18 establishes an obligation re ‘appropriate and proportionate remuneration’, the Lithuanian law now indicates that rights of an author in respect of a phonogram are valid even if the phonogram is included into an audiovisual work. Notably, the CJEU ruled otherwise in Atresmedia case, which held that remuneration does not need to be paid for a phonogram that is included into the audiovisual work. Moreover, it is hard to explain how this amendment is related to the implementation of Article 18 of the DSM Directive.