The DSM Directive: one year on

With just under a year left for the EU member states to transpose the Directive on Copyright in the Digital Single Market in their respective countries, we consider the position in six key countries.

Background

Following adoption by the European Parliament and Council, the Directive on Copyright in the Digital Single Market (the DSM Directive) came into force on 6 June 2019. Member states have until 7 June 2021 to implement the DSM Directive into their national law.

The DSM Directive was controversial, the subject of extensive lobbying by rightsholders and platforms alike, and was finally adopted 2.5 years after it was first proposed by the Commission. The key provisions introduced by the DSM Directive include:

• Article 17 introduced new obligations for online content sharing platforms (OCSPs). It makes OCSPs directly liable if their users post unauthorised copyright material on their platforms. In order to avoid liability, OCSPs will need to demonstrate that they have made "best efforts" to obtain permission from rightsholders and acted diligently to remove any infringing content once notified by rightsholders, as well as keep it disabled.
• Article 15 reinforces the rights of publishers of news or journalistic content. Press publishers based in an EU member state are given a new ancillary right and will be entitled to restrain unauthorised copying and distribution of their publications online.
• Articles 18-22 provide greater protection for content creators. This includes information on how their works are exploited; additional claims for renumeration if the original payment was disproportionately low compared to the revenue generated from exploitation of the work; revocation of licences or assignments where their works are not being exploited; and a new alternative dispute resolution procedure to resolve matters.
• Articles 3 and 4 provide two exceptions to copyright (and database right) infringement for text and data mining. The first is in relation to scientific research. The second allows those with lawful access to the work to conduct text and data mining so long as it has not been expressly reserved (by the rightsholder) and the copies are only kept as long as necessary.

Last year a team of IP lawyers across our European offices considered the impact of the DSM Directive and the provisions above, in six key countries in an article published by Intellectual Property Magazine. With less than a year to implement, we now report on how far each jurisdiction has come.

• Belgium

• France

• Germany

• Italy

• The Netherlands

• The UK

Belgium

The Belgian political spectrum remains divided regarding the DSM Directive - liberal parties often take a critical stance vis-à-vis the directive, while conservative parties are generally not as disapproving (or silent). The current political climate in Belgium, highlighted by the continuous absence of a federal government, has impeded further steps towards implementation of the DSM Directive.

The Belgian Council for Intellectual Property, consisting of distinguished experts in intellectual property law, has prepared draft legal texts for the implementation of the DSM Directive. However, at the time of writing, these texts are not public and have not yet been considered by the Belgian Parliament. Nevertheless, an analysis of these texts seems to imply that the Council could prompt the Belgian legislator to implement the DSM Directive via separate legislative projects.

France

France was the first member state to start implementing the DSM Directive. Law No. 2019-775 of 24 July 2019 "for the creation of an ancillary copyright for the benefit of press agencies and press publishers" implements Article 15 of the DSM Directive by creating new articles in the French Intellectual Property Code. These articles follow the terms of the DSM Directive, creating an ancillary copyright for press agencies and press publishers which lasts 2 years as from 1^st^ January of the year following the year of first publication. As a result, any reproduction or communication, in whole or in part, of their publications in digital form by an information society service provider must be authorised by the press publishers.

The new provisions also provide that the remuneration payable to press agencies and publishers must be based on the revenue generated directly or indirectly by the information society provider as a result of the new publication, or failing that, assessed on a flat-rate basis.

The remuneration is calculated taking into account factors such as the human, material and financial investments made by the press agencies and publishers, their contribution to the provision of general and political information, and the extent to which the information society service provider uses their publications.

A royalty-free licensing programme introduced by Google to meet the terms of the DSM Directive has been challenged by the main unions representing press publishers and news agencies in France who filed a complaint with the French Competition Authority for abuse of dominant position and anti-competitive practices on 15 November 2019. In April 2020, the Authority issued a preliminary ruling which requires Google to conduct bone fide negotiations with press publishers and news agencies for the use of press content by Google's services. These temporary measures are applicable until the publication of the Authority's ruling on the merits.

Transposition of Article 17 (new obligations for OCSPs) of the DSM Directive is currently under discussion by French legislative bodies and is, at this early stage, drafted on very similar terms to those found in the directive.

Germany

Germany consented to the DSM Directive, but expressed serious doubts over the final text in a formal protocol statement. The main concern raised in the protocol statement was the OCSPs' inevitable use of filters to comply with their new obligations and the likely negative impact on the freedom of expression. There has been no update to this protocol statement.

In January 2020, the German Ministry of Justice published draft legislation to implement parts of the DSM Directive. This discussion draft is far from a final version and may still change considerably during the legislative process. In response, 89 position papers have already been submitted by interested parties.

The initial focus of the draft legislation is on the rights of press publishers under Article 15 and the publisher's right to claim fair compensation if granted appropriate rights to do so by authors under Article 16 of the DSM Directive. Most of the position papers address detailed aspects of the draft law depending on the party's own interests. We have identified three broad issues raised by the parties:

1. criticism that certain parts of the proposed legislation will come into effect when the law is enacted, whereas others will only come into effect on the 7 June 2021 deadline;

2. whether text and data mining is permissible or not and how an objection to such use could be implemented; and

3. if it is necessary to exclude or limit further categories of content from the new rights for press publishers.

Germany intends to implement the new protection for press publications as soon as possible and significantly earlier than the 7 June 2021 deadline. The reason for this hurry is that since August 2013, press publishers in Germany had already been entitled to an ancillary copyright in accordance with the German Copyright Act. However, this right was found to be inapplicable following a judgment of the European Court of Justice on 12 September 2019. As such, Germany is looking to correct this as soon as possible. However, until the final implementation of the DSM Directive in June 2021, this ancillary copyright will be a national right.

UPDATE: In June 2020, the German Ministry of Justice published a draft of the "Second Act to Adapt Copyright Law to the Requirements of the Digital Single Market". This discussion draft now focuses on the remaining parts of the DSM Directive, such as the implementation of Article 17 via a new law – the Copyright Service Provider Act (UrhDaG-E).

In this draft, the Ministry of Justice renews its claim to prevent the widespread use of filter technologies to limit “over-blocking” as far as possible – however, as widely criticised, upload-filters are not completely excluded.

In accordance with the DSM Directive, the discussion draft contains an obligation on OCSPs to acquire licences for the reproduction of copyright-protected works for limited minor uses, e.g. for user-generated content. In addition, users are to be given the opportunity to identify permitted uses to protect their content from being blocked or removed - blocking or deletion of content via a pre-flagging procedure is not permitted. If protected content is not licensed and its use is not permitted by law, the OCSP is obliged to remove the corresponding content or block access to it upon receiving information from the rights holder. In the event of disputes between rights holders, platforms and users, a complaints procedure and an out-of-court dispute resolution system shall be made available. While the draft legislation includes sanctions for OCSPs for wrongful pre-flagging and malpractice, these have been criticised for being too lax.

In the interests of the users, the draft also includes a new legal permission for caricatures, parodies and pastiches under German copyright law. It is also intended to amend existing provisions on out-of-print works and to facilitate access to works in the public domain.

In the area of copyright contract law, the draft contains proposed amendments on issues such as appropriate remuneration, further involvement of the author, licence chains or the right to recall exploitation rights that are not exercised.

Italy

In Italy, law is enacted through a two-step process. First, a "delegation law" is issued by Parliament that instructs the Government to implement a directive. This is followed by an implementing "legislative decree" issued by the Government, which follows the instructions given by the Parliament. The first draft of the delegation law for the DSM Directive was submitted by the Italian Parliament on 14 February 2020.

The process was initially slowed down due to the COVID-19 crisis, but progress has now resumed following pressure by rightsholders and their associations. Several players, including Google, Sky and Netflix, have already been heard and submitted position papers. The need to support rightsholders economically following the crisis may actually speed up the process. The Italian Government's goal is to implement the DSM Directive in advance of the June 2021 deadline; possibly as soon as in 2020.

The draft delegation law basically mirrors the provisions of the DSM Directive in respect of Articles 15 and 17 of the DSM Directive. The instructions to the Government are:

• regarding Article 15, "very short extracts" (that are excluded from the scope of Article 15) should be defined in such a way so as not to prejudice the free flow of information; and the authors' share of the revenues that press publishers are authorised to receive for the use of the press publications, should also be defined; and

• regarding Article 17, clarity around the level of diligence required of OCSPs to demonstrate that they have made "best efforts" to obtain authorisation from the rightsholders (in accordance with the principle of reasonableness); and establishment of the complaint and redress mechanism for users (under Article 17(9) of the DSM Directive), including the body responsible for the management of such procedures.

The Netherlands

A legislative proposal to amend the Copyright Act, the Neighbouring (or Related) Rights Act and several other laws was submitted to the Dutch Parliament on 11 May 2020. It is expected to be adopted later this year or in early 2021.

The proposed legislation is a direct and systematic implementation of the DSM Directive in almost all aspects. For some subjects, no amendment is required, as the Dutch legislation on these subjects and currently in force is already in accordance with the directive. Some legislation is being amended and some new provisions have been proposed. As a rule, these amendments and additions are based directly on (and often use the language of) the respective provisions of the DSM Directive.

For a limited number of subjects, the DSM Directive offers Member States legislative options. The Netherlands has chosen to implement Article 12 of the DSM Directive (which allows an agreement entered into by a collective management organisation to be extended to cover rightsholders who have not authorised that organisation, for example where the works are not or no longer commercially available) and Article 16 (which allows publishers to whom authors have transferred or licensed their rights to be entitled to a share of the compensation for the use of the work).

The debate on the implementation of the DSM Directive still focuses on Articles 15 (press publisher rights) and 17 (new obligations for OCSPs). There is currently no Dutch litigation relating directly to the new DSM Directive based legislation yet. In an Opinion given in the context of a Supreme Court Appeal relating to the interplay between the Copyright Directive and the E-Commerce Directive, the Advocate-General shed some light on the role the DSM Directive (in draft at the time) might play in assessing an intermediary's liability for damages. He noted that the DSM Directive, specifically its preamble and Article 17, had been amended in an attempt to clarify that any new legislation is to supplement rather than replace or overrule the relevant provisions of the E-Commerce Directive. The Supreme Court didn't address the DSM Directive in its decision in this matter and the status of the case is unclear.

The United Kingdom

The UK Government indicated in January 2020 that it would not implement the DSM Directive, as its implementation deadline was after the end of the Brexit transition period. The UK Government has since suggested that it will consider the UK's copyright regime and policy more broadly, including examining the extent of online content-sharing services' liability for the posting of copyright-infringing material on their platforms, avoiding the risks of over-blocking content and protecting freedom of expression online.  This may mean that the balance of responsibility between platforms and their users for online content, may be tilted differently in the UK in future.

Conclusion

With the notable exception of the UK, our six key countries have started the process of implementing the DSM Directive. Articles 15 and 17 remain the most controversial across the various jurisdictions. France already has legislation in place granting press publishers the new ancillary right envisaged by the DSM Directive, as well as related litigation. Germany, Italy and the Netherlands are hoping to implement some or all of the DSM Directive early.

In relation to Article 17 of the DSM Directive, the member states may be awaiting further guidance from the EU Commission on the "best practices for cooperation between online content-sharing service providers and rightsholders" which was foreshadowed in Article 17(10). The Commission held six stakeholder dialogues from October 2019 to February 2020 in Brussels which were attended by rightsholders, platforms and users' organisations. The Commission's guidance is now awaited.

The Commission is also proposing yet further regulation of online platforms and digital services. The Commission launched a new consultation on the Digital Services Act which explores fundamental changes to the way online platforms and digital services are regulated in the EU, and the exemptions available to them for their users' content under the E-Commerce Directive. We have summarised the key issues stemming from the Commission's 59 page questionnaire here. The Commission's deadline for responses to the consultation is 8 September 2020.