Contractual override and the new exceptions in the Copyright in the Digital Single Market Proposal

The new mandatory exceptions: weaponless ...
As readers know, the draft Directive on copyright in the Digital Single Market [Katposts here] has now reached the trilogue stage, further to the adoption – by both the Council and the European Parliament – of their own versions of the text to be used as a basis for the next round of negotiations. An important aspect, which has not received too much attention, concerns the topic of contractual override of new mandatory exceptions in the directive.

The IPKat is therefore delighted to host the following analysis by Adrian Aronsson-Storrier (University of Reading).

Here’s what Adrian writes:

Regular IPKat readers will be familiar with the EU Copyright in the Digital Single Market Proposal, which was first detailed by the European Commission in 2016 and forms part of the Digital Single Market Strategy launched in 2015. The proposal continues to attract controversy as it undergoes final compromise trilogue negotiations. Lawmakers aim to finalise the text of the proposed Directive this month, with a final vote in the EU Parliament to approve the package then likely in early 2019.

The most controversial and unresolved elements of the proposal relate to the proposed press publishers’ right (Article 11) [Katposts here] and platform liability (Article 13) [Katposts here]. The proposal also includes provisions to ensure fair remuneration for authors and performers (Articles 14 -16) and introduces new exceptions for text and data mining (Article 3) [Katposts here and see also here and here], digital and cross border teaching (Article 4) and the preservation of cultural heritage (article 5). This blog post focuses on the proposed copyright exceptions in the proposal, and their compatibility with contractual override – i.e. contractual terms in copyright licence agreements which purport to restrict users’ ability to rely upon exceptions.

The trilogue negotiations between the European Parliament, the Council and the Commission continue, with negotiation sessions having commenced in October and continuing with two further rounds scheduled in December. In the interests of transparency, Julia Reda (Member of the European Parliament and past rapporteur on the European Parliament's review of the Information Society Directive) has been publishing trilogue negotiating documents on her website, including compromise proposals from the most recent negotiation on 26 November.  These documents allow analysis of those provisions in the Directive which have been provisionally agreed, including the articles relating to the new copyright exceptions and their relationship with contract. 

What is the existing relationship between copyright exceptions and contract in the EU?

The current EU proposals aim to update the 2001 EU Information Society Directive, which provides a list of copyright exceptions from which member states may select when designing their domestic copyright law. The Information Society Directive does not expressly set out mandatory rules binding domestic Member States’ law on the relationship between contract and exceptions. Copyright academics have generally argued that contractual override of copyright exceptions is therefore permitted under the Directive, subject to the flexibility for individual Member States to modify this presumption in their domestic law.

In contrast to the Information Society Directive, other EU directives relating to copyright have however explicitly addressed the relationship between exceptions and contract. The Computer Program Directive includes exceptions permitting the creation of backup copies of a program, the privilege to observe, study or test the functioning of the program, and decompilation which could not be excluded by contract.  Similarly, the 1996 Database Directive includes exceptions which could not be set aside by contract.

The relationship between copyright exceptions and contract has received relatively limited judicial attention at the CJEU level. Some guidance has however been given in Ryanair Ltd v PR Aviation BV (Case C-30/14) and Verwertungsgesellschaft Wort (VG Wort) v Kyocera and others (case 457/11). In Ryanair, the court ruled that the provisions on unwaivable copyright exceptions within the Database Directive applied only to databases protected by the copyright or the sui generis right. Where a database was not protected by the copyright or sui generis right, the Directive “does not prevent the adoption of contractual clauses concerning the conditions of use of such a database[Para 39]. The contractual freedom aspects of the VG Wort case have received comparatively less attention, but the case could be read as suggesting “that the default position where contract or licence terms are not expressly allowed to limit the scope of an exception is that the exception will prevail over any rights holder authorisation.” (see voluntary memorandum from the UK Department for Business, Innovation and Skills paragraph 5).

What does the proposal say about contractual override of exceptions?

Article 6(1) of the Council’s proposal has been provisionally agreed, and provides that “[a]ny contractual provision contrary to the exceptions provided for in Articles 3, 4 and 5 shall be unenforceable.” On the face of this provision, it seems that the new copyright exceptions introduced by the proposal cannot be rendered ineffective by contract. That a specific copyright override provision has been included in the proposal also suggests that lawmakers are either unaware of the interpretation of VG Wort that by default copyright exceptions prevail over contract or that they doubt this interpretation of the case. The inclusion of Article 6(1) does at least indicate that EU lawmakers are conscious of the risk of contractual override of exceptions and that there is a broad political consensus that in general exceptions should be protected against such override.

A closer analysis of the agreed texts of Articles 3, 4 and 5, however, demonstrates that rather than preventing contractual override, the proposed exceptions allow rightsholders to retain significant contractual control. The text and data mining exception in Article 3(1) operates only where the research organisations and cultural heritage institutions have lawful access to the works or other subject matter. Contractual conditions could potentially restrictively define the conditions of lawful access to a database (for example, restricting the number of extractions from a database which were within the scope of the licence; and deeming additional extractions as involving unlawful access), restricting the operation of the contractual override clause.

More troubling issues arise with the digital and cross border teaching exception in Article 4. Here Article 4(2) permits a member state to legislate that the cross border teaching exception does not apply either generally or for specific uses “to the extent that suitable licences … covering the needs and specificities of educational establishments are easily available in the market”. In other words, Member States can provide that if the rights holder is offering a cross border teaching licence then the exception in Article 4 does not apply at all and the contractual override provision in Article 6(1) does not operate – effectively educational establishments could face the mirage of an unremunerated exception that operates in national law until a rights holder asks for a licence fee.

Finally, the exception permitting the preservation of cultural heritage in Article 5 applies only where the relevant works “are permanently in [the cultural heritage institutions’] collections”. As an increasing volume of cultural material is not being sold, merely licenced on a time-limited basis, and therefore never permanently in the collection of an institution it might be feared that the exception will do little to allow the preservation of cultural heritage.

... Or able
to tame rightholders?
‘Unenforceable’, ‘Null and void’ or ‘cannot be overridden by contract’?

The drafting choice in Article 6(1) to make contractual provisions ‘unenforceable’ is a peculiar choice. The term ‘unenforceable’ contrasts with language used in the Software and Database Directives which make inconsistent contractual provisions ‘null and void’ and also diverges from the language used in the Directive implementing the Marrakesh Treaty, which provides that an exception ‘cannot be overridden by contract’. There have been no public statements from the EU bodies justifying the rationale for the differences in drafting language. If it the legislative intention is that the terms ‘unenforceable’, ‘Null and void’ and ‘cannot be overridden by contract’ should be treated as synonymous, then there seems to be no good reason for the inconsistent drafting. On the other hand, if there is an intention that these terms have distinct legal effects, then clarity on the legal significance of these distinctions would be welcomed.

Finally, it is disappointing that the EU Commission and Parliament have not used the opportunity presented by the review of EU copyright law to revisit the Ryanair case. This means that for creations that fall outside the meaning of a work in the Information Society Directive there would be greater contractual scope to restrict activities such as quotation which serve the underlying public policies protected by copyright exceptions. Additionally, the decision not to revisit the relationship between existing exceptions in the Information Society Directive and contact means that core public interest exceptions (e.g. quotations for purposes such as criticism or review under Article 5(3)(d) of the Information Society Directive) remain at greater risk of contractual override than the new, arguably less important, exceptions introduced in this recent proposal.
Contractual override and the new exceptions in the Copyright in the Digital Single Market Proposal Contractual override and the new exceptions in the Copyright in the Digital Single Market Proposal Reviewed by Eleonora Rosati on Friday, November 30, 2018 Rating: 5

1 comment:

  1. See also ECJ Copydan Rec. 65 f. To my opinion the ECJ's wording makes it clearer, that your interpretation of VG Wort is correct. What do you think?

    "Accordingly, with regard to the effect on fair compensation of the fact that the rightholder has consented to the use of files containing protected works, the Court has held that where a Member State has decided, pursuant to Article 5(2) of Directive 2001/29, to exclude, from the material scope of that provision, any right for rightholders to authorise reproduction of their works for private use, any authorising act a rightholder may adopt will be devoid of legal effects under the law of that State. Consequently, such an act has no effect on the harm caused to rightholders due to the introduction of the measure depriving them of that right and cannot, therefore, have any bearing on the fair compensation owed, whether it is provided for on a compulsory or an optional basis, under the relevant provision of that directive (see judgment in VG Wort and Others, C‑457/11 to C‑460/11, EU:C:2013:426, paragraph 37).

    Since, in circumstances such as those set out in paragraph 65 above, such authorisation is devoid of legal effects, it cannot, of itself, give rise to an obligation to pay remuneration of any kind in respect of the reproduction, for private use, by the user of the files concerned to the rightholder who authorised such use."

    ReplyDelete

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