The DSM Directive two years on: is it in force?

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 had until 7 June 2021 to implement the DSM Directive into their national law. However, as at 1 August 2021, only eight of 27 EU member states have implemented the DSM Directive into their national law.

The DSM Directive was controversial, the subject of extensive lobbying by rightsholders and the tech giants alike, and was finally adopted two and a half 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.

  Poland filed a complaint against the European Parliament and the Council of the EU seeking annulment of Articles 17(4)(b) and 17(4)(c), and claiming that those filtering obligations would lead to censorship and limit freedom of expression. On 15 July 2021, in his Opinion, Advocate General Saugmandsgaard ØE proposed that the action brought by Poland should be dismissed as there were sufficient safeguards in Article 17 to minimise the risk of online platforms over-blocking content with their filters. The CJEU’s decision is now awaited.

  Under the old legal framework (Article 3 of the InfoSoc Directive) operators of platforms did not in principle communicate copyright works to the public, if infringing content was uploaded by the platform’s users, merely by providing the platform infrastructure. This was emphasised by the CJEU in two cases on 22 June 2021 (C-682/18 (YouTube), C-683/18 (Cyando)). However in those cases, the CJEU explained that if the platform operator intervened in the sharing of illegal content, it would become liable - for example if the platform had concrete knowledge of the copyright-infringing content and did not immediately delete or block the content, or the platform was involved in the selection of the content illegally communicated to the public.

• 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 remuneration 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.

A team of IP lawyers across our European offices has been following the progress of the DSM Directive and its likely impact. With the implementation deadline having passed, we now report on how far six key jurisdictions have come and the Commission’s guidance on Article 17.

• EU Commission's Guidance

• Belgium

• France

• Germany

• Italy

• The Netherlands

• The UK

EU Commission’s Guidance

Article 17(10) of the DSM Directive proposed that the EU Commission would provide guidance on the "best practices for cooperation between online content-sharing service providers and rightsholders". The Commission held six stakeholder dialogues from October 2019 to February 2020 in Brussels which were attended by rightsholders, platforms and users' organisations. Although non-binding, the guidance was intended to balance the different stakeholders’ competing interests and provide practical advice ahead of the DSM Directive’s implementation deadline.

On 4 June 2021, just one working day before the transposition deadline, the Commission released its Guidance on the implementation of Article 17 of the DSM Directive. A number of organisations have expressed their disappointment at its contents. Amongst other things, the Guidance states that:

• Article 17 does not introduce a new right in EU copyright law. However, member states should specifically implement the provision and its liability regime, and they should not rely on their previous national implementation of “communication to the public” under Article 3 of the InfoSoc Directive.
• Member states are urged to implement explicitly the definition of OCSPs in the DSM Directive. They should assess on a case-by-case basis whether an OCSP makes available a “large amount” of copyright material and should not seek to quantify it.
• Member states are encouraged to maintain or establish voluntary mechanisms to facilitate agreements between rightsholders and service providers, or collective licensing solutions. Member states may encourage the development of registries of rightsholders that could be consulted by OCSPs.
• The requirement to make “best efforts” is an "autonomous notion" of EU law and should be transposed by the member states in accordance with the Guidance and interpreted in light of the aims and objectives of Article 17. It will require a "case-by-case" assessment of the actions undertaken by OCSPs, taking into account proportionality. For example, in the context of obtaining authorisations, larger OCSPs will be expected to reach out to a higher number of rightsholders to obtain authorisations. Rightsholders and OCSPs will be expected to conduct licensing discussions in good faith and conclude licences based on fair terms.
• Article 17(4)(b) (regarding making specific works unavailable if notified) should be implemented in a technologically neutral and future proof manner. Member States should not mandate either the use of a technological solution nor impose any specific technological solutions on service providers in order to demonstrate best efforts. The available industry practices will evolve over time and OCSPs should not be expected to apply the most costly or sophisticated solutions if that would be disproportionate. These costs should also account for the costs of human review of content.
• The “necessary and relevant” information to be provided by a rightsholder to an OCSP, will vary depending on the work concerned and the tech solution used by OCSPs (eg the information required will vary depending on whether fingerprinting or metadata-based solutions are used by the OCSP to make specific works unavailable).
• Automated blocking of content (preventing the upload of infringing content ex-ante) should in principle, be limited to "manifestly infringing uploads", including with “a rapid ex ante human review” for content which is earmarked as time sensitive and where the upload could cause “significant economic harm” to rightsholders. Other uploads, which are not manifestly infringing, should in principle go online and may be subject to an ex post human review if rightsholders complain by sending a notice.
• “Best efforts” in the context of the notice and take/stay-down system (where OCSPs act ex post) should also be carried out on a case-by-case basis; taking into account the principle of proportionality; and will require rightsholders to submit properly substantiated notices.
• The exemptions for user generated content which may constitute quotation, criticism, review, caricature, parody or pastiche, are mandatory and member states should amend their national laws to ensure these exemptions are available in the online environment.
• Member states must provide an out-of-court redress mechanism for users in the event of a dispute over the blocking or removal of their content and the decision as to whether the use is legitimate or not and should be restored or not, should be subject to human review in an expeditious timeframe.

Belgium

As always, the Belgian legislator is late to adopt a national law implementing an EU directive.

A preliminary draft implementing the DSM Directive into Belgian law was approved by the Council of Ministers on 4 June 2021. The preliminary draft is currently under review by the Belgian Council of State, which has not yet rendered its advice. The Belgian Data Protection Authority also published its opinion on 25 February 2021 on the provisions of the preliminary draft that concerned the processing of personal data.

An official text of the preliminary draft is currently not yet publicly available. An unofficial version can be found here.

Most of the provisions will be transposed into Book XVII of the Belgian Code of Economic Law, but some provisions (relating to the procedure) will be transposed into the Belgian Judicial Code.

The preliminary draft aims to transpose the DSM Directive into Belgian law and, under this framework, also provides for a new regulation aimed at better enforcement of copyright and related rights on the internet. In addition to transposing the first three parts of the Directive (ie concerning the four new mandatory exceptions as regards copyright and related rights, the regulation of out-of-commerce works and the strengthening of the position of rightsholders with respect to online use of their works), the preliminary draft law also provides for a new procedure in the fight against mass online infringement. Specifically, the draft provides for a new procedure in summary proceedings, the aim of which is to put an end, quickly and permanently, to online infringements that are manifestly widespread.

The draft also provides for the creation of a new service within the FPS Economy: the Service for the Fight against Copyright Infringements and Related Rights on the Internet. This service will have the power to further specify the detailed rules of application of the provisional measures ordered by the judge and to adapt them in order to guarantee their effectiveness.

Finally, the rights of the press publishers and the possibility of a right to remuneration for performers will have to be studied further. They will then be examined again by the Council of Ministers with a view to better protecting the weaker party. Questions have been put to the European Commission and to a legal consultancy firm to find out what room for manoeuvre is available.

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 two years as from 1 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 in November 2019. The proceedings are ongoing.

Regarding Article 17 of DSM directive, it has been transposed by a statutory instrument “ordonnance” n°2021-580 dated 12 May 2021 which came into effect on 7 June 2021.

Germany

Even though Germany consented to the DSM Directive, Germany still expressed serious doubts over the final text in a formal protocol statement. Despite those original doubts about the final text of the DSM Directive, the German Ministry of Justice went on to publish draft legislation in January 2020 to implement parts of the DSM Directive. The initial focus of the draft legislation was on the rights of press publishers under Article 15 and the publishers’ right to claim fair compensation if granted appropriate rights to do so by authors under Article 16 of the DSM Directive. In June 2020, a draft of a “Second Act to adapt Copyright Law to the Requirements of the Digital Single Market” was published. This focused 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). An English working translation of the Copyright Service Provider Act can be found here.

Germany has now finally implemented the DSM Directive with the “Act to Adapt Copyright Law to the Requirements of the Digital Single Market” which entered into force on 7 June 2021. This new law implemented the necessary changes to the German Copyright Act as well as other necessary changes. As part of the implementing legislation the new Copyright Service Provider Act was passed and entered into force on 1 August 2021. This new law addresses the legal responsibilities of OCSPs and specifically contains regulations on user rights, as well as remuneration claims of creators for the use of their content by OCSPs. Furthermore, an information right for researchers on platform economy was included. The Copyright Service Provider Act mainly applies to service providers who upload, organize and make available to the public large amounts of third-party data with the intent to realize a profit. The new law contains certain exceptions to its applicability for eg non-commercial services, open source projects or online marketplaces. In exchange for the additional requirements applied to OCSPs, they are then released from liability under copyright law, as long as they meet their obligations in accordance with high industry standards.

Among such obligations, OCSPs are required to use best efforts to procure licences for the reproduction of copyright-protected works in 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. This appears to contradict the Guidance of the EU Commission (for which see above). 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 rightsholder. In the event of disputes between rightsholders, platforms and users, a complaints procedure and an out-of-court dispute resolution system must be made available. While the law 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 German implementation also includes a permitted use for caricatures, parodies and pastiches in German copyright law. This is intended to amend existing provisions on out-of-print works and to facilitate more access to works in the public domain. Similarly, materiality thresholds for permitted non-commercial use are included. However, these thresholds are rather low with 160 characters of text or 15 seconds of video or photographs and graphics of up to 125 kilobytes. These thresholds have already become the focus of criticism around the new permitted use scenarios.

Italy

On 20 April 2021, the Senate of the Italian Republic gave its final approval to the “delegation law” (Law 53/2021), whose Article 9 authorised the transposition of the DSM Directive’s provisions into Italian law.

As required by Article 76 of the Italian Constitution, such law contains instructions that the Government is bound to abide by in the process of adopting the legislative decrees necessary to implement the DSM Directive. Among these instructions, the relevant ones in the context of this article are the following:

• regarding Article 3, the exceptions and limitations to allow text and data to be extracted for the purposes of scientific research should be drafted to ensure that networks and databases are always duly protected, while the conditions to obtain legal access to them, as well as the individual rights to be authorised to do so, should be expressly determined;
• regarding Article 17, the final wording of the provision translates “best efforts” with “massimi sforzi” – a purely quantitative notion which, as some academics highlighted, is widely alien to the Italian legal tradition and might therefore cause significant interpretative uncertainties (ultimately leading to the risk of over-blocking policies being adopted by OCSPs exclusively out of precaution);
• regarding Article 20, the modalities and criteria regulating contractual adjustment mechanisms on behalf of authors and performers, which will operate as long as a collective agreement is not reached for these categories of workers, should be explicitly defined; and
• regarding Article 22, the modalities and criteria to exercise the right of revocation should also be explicitly defined, but they can vary depending on the sector and the type of work at stake.

Law 53/2021 came into force on 8 May 2021, but the Government failed to meet the June 2021 deadline initially set for its implementation, by not adopting the legislative decrees mentioned above in time. For the time being, the draft version of such decrees is still under discussion.

The Netherlands

The Netherlands is among the few countries to implement the DSM Directive on time. A proposal to implement the DSM Directive was first published on 11 May 2020. After several amendments, the implementation law passed on 16 December 2020 and entered into force on 7 June 2021. The most important changes resulting from the DSM Directive are reflected in the Dutch Copyright Act (DCA). The revised DCA demonstrates that the Dutch legislator largely adhered to the language of the original (English) version of the DSM Directive. Unknowingly, it even abided by the EU Commission’s Guidance of 4 June 2021. Here, we focus on three interesting features of the revised DCA.

First, regarding the use of “best efforts”, the Dutch legislator deviated from the Dutch version of the DSM Directive. This Dutch version states that OCSPs should “make every effort” to (a) obtain an authorisation, (b) ensure unavailability of infringing content and (c) prevent future uploads. As this seems incongruent with the original English version, the Dutch legislator specifically adhered to the “best efforts” terminology.

Secondly, the revised DCA explicitly anticipated the European Commission Guidance. Indeed, it opened a possibility for this Guidance – as well as future specifications of the DSM Directive – to be implemented through governmental decree, ie without having to follow the regular legislative process. This allows for quick specification of the provisions implementing the DSM Directive.

Thirdly and finally, according to its Guidance, the European Commission prefers explicit implementation of all provisions of the DSM Directive, including Article 17(7) on the exceptions for e.g. quotations, reviews and parodies. As mentioned in Dutch legislative history, the DCA already provides for ample opportunities to use copyright protected works for quotations, reviews and parodies, even in an online setting. Therefore, the revised DCA does not contain any “new” exceptions to the exclusive copyright, save for those which are truly new (particularly articles 15n and 15o DCA on the text and data mining exceptions).

In conclusion, mostly adhering to the wording of the original version of the DSM Directive, the Dutch legislator definitely “played it safe”. On the one hand, this resulted in a neat and timely implementation process. On the other hand, the Dutch legislator did not provide much clarity on the interpretation of some of the vague concepts contained in the DSM Directive. Unfortunately, nor did the European Commission’s Guidance of 4 June 2021, introducing new open-ended concepts like “manifestly infringing uploads”. As national legislators and the European Commission have been reluctant to define them, our hope is pinned on the CJEU.

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.

At present, following publication of the draft Online Safety Bill on 12 May 2021, the UK Government’s focus is on holding social media companies accountable for illegal content such as child sexual abuse, racist abuse, terrorist material, material that promotes suicide or facilitates online scams. Companies will have to flag and remove material quickly and effectively, or face action from the regulator - Ofcom will be given the power to fine companies failing in a new duty of care of up to £18 million or 10% of annual global turnover, whichever is higher, and have the power to block access to sites. The draft legislation also includes safeguards for free speech and journalistic content. This legislation may lay the foundation for any new legislation regarding IP infringing content online.

Conclusion

As at 1 August 2021, only eight of the 27 EU member states have implemented the DSM Directive. These are: Germany, France, the Netherlands, Czechia, Denmark, Lithuania, Hungary and Malta. The UK indicated that it would not implement the DSM Directive (ahead of Brexit) and will introduce its own regime to regulate the tech giants in the UK. If the requirements are different from the DSM Directive in the UK, this may pose a challenge for the larger platforms offering content and services across Europe.

Articles 15 and 17 remain the most controversial across the various jurisdictions. France quickly implemented legislation granting press publishers the new ancillary right envisaged by the DSM Directive and this has already generated related litigation in France. Although Germany and the Netherlands have implemented the DSM Directive, there is still considerable debate about how Article 17 will apply in practice. In its Guidance, the Commission has urged member states to implement the DSM Directive explicitly, but also suggested different levels of review, prior to upload, for material which is “manifestly infringing” or “earmarked by rightsholders”. If followed, these additional concepts are likely to give rise to further debate.

The DSM Directive is only one part of the Commission’s interest in the regulation of online platforms and digital services. Following a consultation involving a 59 page questionnaire (here), in December 2020, the Commission published drafts of the Digital Services Act and the Digital Markets Act which propose fundamental changes to the way online platforms and digital services are regulated in the EU, the exemptions available to them for their users' content under the E-Commerce Directive, and the regulation of gatekeeper platforms which control entire platform ecosystems and can engage in unfair business practices.

As well as regulating online platforms more generally, international pressure has mounted on the tax treatment of companies operating in the digital economy in recent years with several jurisdictions in the EU and the UK implementing unilateral domestic measures such as France’s and the UK’s Digital Services Taxes (DST) which seek to tax the revenues of search engines, social media platforms, online market places and others. The OECD’s project on the tax challenges from the digitalisation of the economy proposes significant changes to the international tax landscape with the aim of delivering a global consensus including in over 130 countries as part of the Inclusive Framework. The solutions designed under this project are expected to be finalised in October 2021 leading to the repeal of DSTs implemented by countries, believed to be an interim measure. In addition, the European Commission launched a public consultation this year on a new digital levy to ensure fair taxation in the digital economy whilst facilitating Europe’s recovery post Covid-19. The levy will be designed in a way that is consistent with the ongoing work undertaken by the OECD and signals the continued drive to align the tax system with the digitalisation of business operations. There are also other measures due to come into force, which will impose reporting obligations on digital platforms to ensure that sellers using the platforms are declaring all of their taxable earnings to the relevant jurisdictions.