Second-hand sales, digital downloads and TPMs: the Court of Justice is closing in on the key questions
Author: Tony Ballard
The UsedSoft decision, a year on, is still a matter of urgent concern in digital media sectors as disparate as publishing, music and console games.
UsedSoft was a case in which the Court of Justice held, in effect, that a paid-for download of a computer program could be sold on by the user, second-hand, to a third party without infringing copyright notwithstanding that the user had not bought a physical article and that the user’s licence specifically prohibited it. The principle of exhaustion applied.
Two big questions remain unanswered. First, is the effect of the decision limited to computer programs? We looked at this a year ago, showing how the ground had been laid for the exhaustion principle to apply to downloads of other digital products such as music, e-books, films and so forth.
Second, can second-hand sales be prevented by technical means such as DRM, otherwise known as technical (or content) protection measures (TPMs)? This is highly pertinent because circumvention of TPMs is generally illegal in Europe, thanks to Article 6 of the Information Society Directive, and there is nothing about the principle of exhaustion in Article 6. Could second-hand sales be prevented by the use of TPMs?
TPMs and interactive (console) games
In principle, the answer to the second question is no. In VG Wort v Kyocera earlier this year, the Court of Justice made it clear that it would be inappropriate for TPMs to be used to prevent private copying within the scope of a national exception. It must follow from this that their use to prevent other acts for which no authorisation is required would also be inappropriate.
In practice, however, it is more difficult since TPMs cannot necessarily distinguish whether a particular use is within the scope of an exception, still less whether it is within scope of a particular licence or requires authorisation in the first place. The Information Society Directive offers a possible solution in relation to exceptions, requiring or (in the case of private copying) enabling Member States to adopt separate measures to give users the means of benefiting from an exception. But it offers none in relation to other forms of authorisation.
Now the practical problem has come before the Court of Justice in Nintendo v PC Box, a case involving the use of TPMs to protect interactive console games that had be manufactured by or were under licence from Nintendo. In essence, the question before the Court is what to do where the TPMs prevent or restrict not only the playing of unauthorised games (such as pirate copies) on a Nintendo console but also the playing of other games which do not require Nintendo’s authorisation.
The case has not yet been decided but we now have Advocate-General Sharpston’s Opinion. It builds on the decision in Wort, saying that (quite apart from any competition considerations) there would appear to be no justification for legal protection to be given to TPMs to the extent that they prevent or restrict acts which do not require the rights holder’s authorisation. And to deal with the practical problem, Sharpston invokes the principle of proportionality and its three classical components - a measure is proportionate if it pursues a legitimate aim, is suitable to achieve it and does not go beyond what is necessary to do so. How that test applies would be a matter of fact and degree for the national courts.
Second-hand sales exhaustion
It will be immediately apparent from the foregoing that, if the UsedSoft decision applies to digital products generally, second-hand sales could not, in principle, be prevented by the use of TPMs since the acts of reproduction and distribution involved would not require rights holders’ authorisation and the use of TPMs to prevent the sale would not be justified. In principle, it would not be illegal to circumvent the TPMs. In practice, however, it would depend on matters of fact and degree in the application of the proportionality test, but the principle is clear.
It might, perhaps, be said that the exhaustion principle, on which the UsedSoft decision rests, should not be extended in effect to defeat the TPM provisions of the Directive. But the Court of Justice has shown itself in UsedSoft and elsewhere to be minded to return to single market fundamentals in relation to copyright. In its present fundamentalist mood, it is unlikely to accept this.
The Court in recent cases has treated copyright as a restriction on the single market freedoms protected by the Treaty but has made it clear that it will be upheld to the extent that doing so is justified. This approach puts remarkable powers in the hands of the Court to say what will be protected and what will not, as FAPL has discovered. It opens the way to the remoulding of copyright law in a far more radical way than was ever contemplated by such cases as Magill.
There is little reason to suppose that TPM protection under Article 6 will be treated differently. TPM protection restricts those fundamental freedoms in the same way as the reproduction, communication to the public and distribution rights. It is unlikely that the Court would allow TPMs to apply more widely than the copyright restrictions that they are intended to support. By picking out the reference to proportionality in Recital 48, the Opinion has found a hook on which both to hang a similarly fundamentalist approach to TPMs and to enable practical problems of implementation to be overcome.
Avoiding the problem
If TPMs cannot be used to prevent second-hand sales of digital products apart from computer programs, rights holders might yet hope to distinguish the UsedSoft decision on the basis that it was decided under the Software Directive, which in some respects is different (a lex specialis) from the Information Society Directive and that it was decided partly on the basis of those differences.
The enthusiasm with which the Court of Justice has embraced the single market principles of the Treaty, treating copyright as a derogation from them, suggests that it might have reached the same decision in UsedSoft even if it had not been able to rely on the differences in the Software Directive and the judgment even anticipates that this might be so.
If the decision applies only to computer programs under the Software Directive, however, console games and other digital products are likely to escape its effects. Some low-level judicial authority points in this direction - a German regional court earlier this year declined to apply UsedSoft to the distribution of e-books. And there is of course iTunes and the ReDigi decision in the US. Readers must draw their own conclusions.
A more effective solution for rights holders might be to exploit their works by streaming, thereby avoiding the risk that a download might be construed as a sale. A halfway house might be a download with a licence for a limited term, depending on the length of the term.
This is only the second case in which the Court has had to consider the relationship between the copyright provisions in Articles 2, 3 and 4 of the Information Society Directive and the TPM provisions in Article 6. If it follows the fundamentalist course on which it appears to be embarked, it seems inevitable that it will align both sets of provisions so that they cover the same ground. It looks as though TPMs are unlikely to provide a platform from which to achieve wider protection.
04 October 2013
Government intervention in public service broadcasting: the draft Public Bodies (Modification of Functions of Ofcom) Order 2013
Author: Tony Ballard
Henry VIII is notorious not only for his wives but also for the Statute of Proclamations in 1539 by which Parliament gave him powers to legislate by proclamation. The Statute was repealed on his death but Parliament now controversially but almost routinely confers powers on Ministers of the Crown to do much the same. When presented to Parliament in a Bill, they are known as Henry VIII clauses. They enable primary legislation to be amended or repealed by Ministers by Order or other statutory instrument. The Legislative and Regulatory Reform Bill of 2006, in which such clauses appeared, was described by one commentator as the Abolition of Parliament Bill. Lord Judge last year said that Henry VIII clauses should be confined to the dustbin of history and that we should break what he believed to be a “pernicious habit”.
One such clause is now being invoked to amend provisions of the Communications Act 2003. Under that Act, Ofcom has an obligation to review and deliver reports at least every five years on the extent to which the public service broadcasters fulfilled the purposes of public service television broadcasting in the UK. Ofcom has duly delivered reports on two occasions since 2003. The next is due in 2014 at the latest. Officials have taken the view that the substantial resources involved in such a review are better employed in other uses and in July the government announced that it would amend the Act so as to roll back unnecessary red tape and to reduce the regulatory burden on PSBs. But instead of primary legislation it is doing so under a Henry VIII clause in the Public Bodies Act 2011. That is an Act conferring powers on Ministers to modify the functions of certain public bodies, including Ofcom, in the interests, in effect, of efficiency, effectiveness, economy and securing appropriate accountability to Ministers. The government says that it believes that it is sensible to build in sufficient flexibility for Ofcom to conduct reviews when the timing is right rather than on a rigid timescale. Having consulted Ofcom, it has laid a draft Order before Parliament, no doubt as a means of saving time and rescuing Ofcom from the burden of the 2014 review.
The draft Order is certainly flexible, at least so far as the Minister is concerned. Not only is Ofcom to conduct the review only as and when the Minister calls for it, but the scope of the review will depend on what the Minister may specify at the time. He or she may limit the review to a particular period (instead of the period since the last review), to a particular “purpose” (instead of the purposes generally), and to fulfil or be compatible with particular criteria (instead of all of them) and even to a particular broadcaster (instead of PSBs as a whole).
If the decision on the timing and scope of the review were put into Ofcom’s hands, Ofcom would have had to make the decision in accordance with its general sectoral duties. But in the hands of the Minister, it is not clear that he or she would be fettered by the sectoral safeguards in the Communications Act or unduly constrained by the purposes for which the power was given by the Public Bodies Act and the decision could be made in pursuit of some other political agenda.
The draft Order would put in the Minister’s hands a power to selectively limit what any review may cover. In unwise hands, it could perhaps substantially skew a future debate on public service broadcasting in a direction which served a political agenda quite different from that which the Communications Act was designed to establish. That would surely be outside the scope of the intentions of Parliament in enacting both the Communications Act and the Public Bodies Act.
One of the central principles of the system of public service broadcasting that was established in the 1920s was and, with adaptations, remains that the broadcasting authorities should be free of government intervention in their day to day affairs and in the content of their programmes. The latest BBC Charter provides for it to be independent, subject to the Charter, the Framework Agreement and the law. Broadcasters in the independent sector are subject to Ofcom’s licence conditions and Codes which are governed by statute. Editorial independence is required of all broadcasters.
The powers that the draft Order would confer on the Minister would not directly threaten the central principle of independence from government intervention. But for public service broadcasting generally and the formation of official broadcasting policy, it would be a step towards centralising powers in the hands of the government instead of Ofcom, the independent regulator.
Freedom from government intervention having been one of the central principles of public service broadcasting since the 1920s, and Parliament having quite recently set out for the first time, in the Communications Act, a holistic, legislative formulation of the purposes of public service broadcasting, it is a surprise to find the government taking powers now to selectively influence what Ofcom may report on with respect to the fulfilment of the purposes of public service broadcasting. The powers can no doubt serve benign purposes but they may open the way to a future government undermining principles of broadcasting that have served the country well for little short of a century.
These are issues that might be debated fully if the changes were made by a Bill in Parliament. It remains to be seen whether the super-affirmative procedure, which has been invented to bring some opportunity for debate in Parliament when Henry VIII powers are used, will enable them to see the light of day.
30 August 2013
Author: Tony Ballard
Government strategy in relation to public service broadcasting (PSB) appears to be going backwards.
Broadcasting policy in this country is largely the fruit of earnest committees that have sat and studied the structure and function of broadcasting every ten years or so since the 1920s. The most recent, more racy than most, was the Carter review which led to the Digital Britain Report in 2009. That was a government white paper. It concluded that the current PSB regime was not going to survive the transition to a fully digital Britain and that the analysis and prescriptions for managing it are more likely to be effective if they start from the premise that the structure and set of entities which have been collectively known as PSB are over.
Now, in “Connectivity, Content and Consumers/Britain’s digital platform for growth”, a government strategy document falling some way short of a white paper (published yesterday, 30 July), the government starts from a quite different and deeply conservative premise. Far from building on Carter’s perception of public service content coming from a much wider range of sources than the broadcasters, and in an environment in which content is consumed actively through search and demand, the government has instead fallen back on the old institutional model of PSB and is suggesting ways of protecting it in the new environment.
What it says is in effect that the PSB model is built on a deal, whereby the PSBs accept obligations such as quality, accessibility and variety in return for privileges such as the licence fee, access to spectrum and a statutory right to prominence in EPGs. This is not exactly a novel perception.
To help preserve the success of the model in the new environment, the government proposes three things. First, to consult on how the PSBs’ current prominence in EPGs can be maintained in the online environment. Second, to consult on how to put an end to PSBs having to pay to be carried on certain platforms. And third that industry itself should think about transmission options, bearing in mind the demand for spectrum for the conveyance of mobile data. That is just about all. Certainly there is no discussion or even reference to the developing concept of public service content, as tentatively explored in the Digital Economy Act. It is as if the government has decided that PSB is and is to remain the exclusive preserve of the existing institutions - the BBC, ITV, Channels 4 and 5 and S4C - for the foreseeable future. If that is so, it would be helpful to have reasons but few are given and it is hard to divine the rest from the text of the paper.
It would not be unreasonable to suggest that such a radical departure from the path indicated in the Digital Britain Report deserves a fuller explanation.
It is not as though the government is unaware of the challenges of the new environment. A consultation paper on media ownership and plurality was launched at the same time as the strategy document and suggests a new approach to the topic in light of the new technologies and the forward movement of the media market. There may be good reason for what appears to be a retrograde step and a lack of ambition for PSB in government strategy but if there is it is not explained.
Losing the initiative
There is also cause for alarm. In another almost contemporaneous document, in which the government offers an explanation of certain modifications being made to Ofcom’s functions by statutory instrument, it sets out a description of PSB which few will recognise except in the most general terms. PSB, it says, is broadcasting which is intended for and will benefit the public rather than a purely commercial operation and which has generally come to mean four things: to increase our understanding of the world, to stimulate knowledge and learning, to reflect the cultural identity of the UK and to ensure diversity and alternative viewpoints. Not since Peacock has PSB been reduced to such a brief description but it lacks Peacock’s hard edge. Gone is the careful enumeration of the features of PSB, translated into legislation in 2003. Nor is there any recognition of the new environment.
In Europe, where public service broadcasting occupies a privileged position in the European legal order, analysis and prescriptions for managing the transition to the new environment are flourishing, as illustrated by the Parliament’s adoption earlier this month (4 July) of a resolution on connected TV, best described as a call for the European Commission to revisit media regulation generally.
It would be a matter of some regret if the lead that the UK might have established in the development of public service media, based on the work of the Carter committee, were now abandoned without some better explanation than that evinced by this disappointingly coy strategy document.
31 July 2013
Author: Tony Ballard
The Court of Justice of the European Union (CJEU) has made a small but significant contribution to the debate surrounding private copying and copyright.
Private copying exceptions in some other European countries are accompanied by a levy system to compensate rights holders. The UK has no such system and does not propose to introduce one, notwithstanding that the Information Society Directive permits private copying exceptions only on condition that rights holders receive fair compensation. The government knows that the ice is thin. It is not therefore surprising to find, in the judgment of the CJEU published yesterday in VG Wort v Kyocera, that the UK has been supporting an ingenious (but now held to be unsuccessful) argument to the effect that it is up to the rights holder to use technical protection measures (TPMs) to prevent copying and that the fact that they are able to do so is sufficient to rule out any requirement to provide fair compensation.
In the judgment, the Court met this argument by confronting for the first time the relationship between the TPM provisions of Article 6 (Obligations as to technological measures) of the Directive and the exceptions for copying that are permitted under Article 5 (Exceptions and limitations), including in particular the private copying exception in Article 5(2)(b). The Court made the point that the TPMs with which the Directive is concerned are those which restrict copying or other acts that are unauthorised, that is to say acts which are neither authorised under a licence granted by the rights holders nor authorised by an exception created by the Member State. Since private copying within the scope of an exception is authorised by the Member State, it would not be appropriate for TPMs to be used to prevent it. It follows that rights holders cannot be expected to use TPMs to prevent authorised copying and that their right to fair compensation is not ruled out by their failure to do so.
There are, of course, other arguments in favour of rights holders being denied any compensation for the proposed new private copying exception but the Court has made clear that this one must fall by the wayside.
The Court also went out of its way to emphasise that Article 3 deals not only with exceptions but also limitations, indirectly highlighting that rights holders will retain the right to use TPMs to restrict the number of copies that may be made of their works (other than in an on-demand context). It is perhaps a signal to the UK government that, in formulating its private copying exception and the provisions for overriding contracts, it should consider the consequences of this. Rights holders can be expected to welcome a proper legal basis for their ability, at least for some kinds of works such as films, to limit the number of reproductions that may be made from any given copy of the work. This might be achieved by treating the exception as a limitation, at least to the extent that rights holders are entitled to limit the number of reproductions. That should also mean that they would, subject to the limitation, retain the right to enforce their reproduction right and to make proper contractual provision for it as well.
The draft clause recently tabled by the Intellectual Property Office to implement the government’s private copying proposals does not address the tension that exists between the TPMs and the proposed exception, other than a tentative provision to the effect that copying falls outside the exception if it involves the circumvention of TPMs. That does not really contribute to the debate.
To boldly go?
Further contributions from the CJEU can be expected since other references on fair compensation are pending before it. Whether the Court will be bold enough to sweep away the process of tinkering with exceptions in favour of a broader, fair use approach to the boundaries of copyright remains to be seen.
28 June 2013
Author: Tony Ballard
Has recent case law of the Court of Justice of the EU (CJEU) established a platform for the introduction of a US-style fair use principle in copyright law? It is not impossible.
Recent decisions of the CJEU could open the way to treating the list of copyright exceptions in the Information Society Directive as a codification of the effects of an underlying single market principle. They could lead to the current patchwork of private copying exceptions and levies across Europe being replaced by a common regime. This might create a Europe-wide commercial space in which innovators could develop new digital technologies to facilitate private access to and use of copyright content without damaging the interests of rights holders.
Gowers and Hargreaves
Google famously suggested to the Gowers Review that the US fair use defence might explain why search engines first developed in the US and not in the UK, where website caching would have been considered an infringement. Google went further in its response to the Hargreaves Review, saying that VCR and DVD players, search engines and MP3 players such as the iPod were all fundamentally grounded in the US fair use regime.
UK respondents to the Hargreaves review, however, were “implacably hostile” to the adoption of a fair use defence, on the grounds of “massive” legal uncertainty, an American style proliferation of high cost litigation and confusion for suppliers and purchasers of copyright goods.
Hargreaves was specifically asked to investigate the benefits of fair use and how they might be achieved in the UK. Whilst not accepting that all the claimed benefits were well founded, the Review saw little prospect of US style fair use being transposed into European law. It thought that promoting a fair use exception in Europe would involve a very protracted political negotiation against a highly uncertain legal background. It focused instead on what could be done within the current framework, in which the main exceptions are limited by EU legislation. It suggested a twin-track approach – pursuing exceptions where feasible within the EU framework and at the same time exploring at EU level a way to permit uses of a work which make the existing exceptions adaptable to future technologies.
Fair use in Europe
On one view, of course, Europe already has embraced a fair use principle. The list of permitted exceptions in the Information Society Directive, circumscribed as they are by the three-step test, might well be characterised as a list of fair uses. If that is right, the difference between Europe and the US is more one of process than principle. The European legislative process is just much slower to respond to change than the US litigation process. What Europe loses in adaptability might be said to be gained in legal certainty.
Perhaps, however, that is not an end of the matter. If the CJEU were to hold that copyright itself is circumscribed by a fair use principle, there would be no need for protracted political negotiations or additional exceptions. The scope of copyright itself would be limited. If the limits were to be set by the application of some such principle on a case by case basis Europe would, in one bound, put the matter into the hands of the judges, as in the US. Could the CJEU do this and would it if it could? It appears at least to have laid the ground for doing so.
As we have pointed out elsewhere, the CJEU appears currently to be remoulding copyright law by reference to fundamental single market principles. In Murphy and FAPL v QC Leisure, the CJEU declined to uphold sections 297 and 298 of the CDPA on the ground that those provisions were an unjustified restriction on the freedom to provide services, one of the fundamental freedoms guaranteed by the Treaty. Article 56 TFEU requires the abolition of all such restrictions when they are liable to prohibit, impede or render less advantageous the lawful activities of a service provider established in another Member State. Recalling that a restriction cannot be justified unless it serves overriding reasons in the public interest, is suitable for securing the attainment of the public interest objective and does not go beyond what is necessary to attain it, the CJEU held that a restriction may be justified by the public interest in safeguarding the specific subject matter of the intellectual property concerned, which includes the opportunity to obtain remuneration which is reasonable in relation to the economic value of the service provided. Anything that goes beyond what is necessary to ensure that reasonable remuneration is not justified.
It is not difficult to see that similar reasoning in an appropriate case, where restrictions on private copying in one Member State had impacts in another, could lead to certain acts of reproduction being held by the CJEU to fall outside the scope of copyright altogether on the basis that restricting them by copyright could not be justified. Certain kinds of private copying might simply fall outside copyright protection if the restrictions could not be justified, because for example they would go beyond what was necessary to obtain reasonable remuneration.
The idea that a rights holder is entitled under EU law only to reasonable remuneration, appropriate to the economic value of the rights, was pioneered by the CJEU in FAPL and was further developed in UsedSoft. At the same time, the CJEU has also been developing the concept of fair compensation for excepted private copying based on its decision in Padawan. These lines of cases may converge. And where reasonable or fair remuneration in a particular case is held to be nil, and where enforcing the relevant rights may have an impact in another Member State, it appears to be only a small step to say that copyright protection ceases to apply in those circumstances. The decision would be fact-dependent and in the hands of the judges, but at that point the defendant in copyright enforcement proceedings might find itself in a position not unlike a defendant in the US raising a fair use defence.
Further, if that is right, the exhaustive enumeration of exceptions in the Information Society Directive might be regarded as a codification of the known boundaries of copyright protection, leaving it open for the CJEU to identify new boundaries in the light of new circumstances.
Consumers increasingly expect to have access to content through multiple devices, when and wherever they please. Business models are changing to meet these expectations. In the UK, where there is effectively no private copying exception apart from recording linear broadcasts for time-shift purposes, there are likely to be copyright constraints that affect business planning. Some of the constraints may be eased later this year by the government’s current proposals for a limited private copying exception but at the time of writing its scope is uncertain, particularly in light of references to the CJEU on the related issue of fair compensation that have yet to be decided. The government has spoken of “legal risk” and the possible need to build further safeguards into the exception to minimise risk. To get certainty, businesses may instead seek licences from rights holders, as Antonio Vitorino has suggested.
But if the scope of copyright itself is limited to what is objectively justifiable in accordance with the jurisprudence of the CJEU, it is not inconceivable that those who are devising new online technologies and business models to respond to customer expectations might in appropriate circumstances consider relying on the new case law to build a new system within that commercial space. If they were able to do so, the benefits envisaged by Google might be achieved, albeit with the burden of a regime where copyright clearance would depend on case by case analysis by the courts with all the uncertainties for which the US fair use system is notorious.
31 May 2013
Author: Tony Ballard
The decision of the Supreme Court on 17 April 2013 in PRCA v NLA (generally known as Meltwater) marks the outer limits of the new European copyright regime applying to the distribution of content in electronic form. Mere reception is not an infringement.
In recent years, the new regime has extended copyright protection beyond the initial transmission of the content to interventions by intermediaries (in SGAE v Rafael Hoteles and Airfield) and to the countries in which the target audiences are located (in Football Dataco v Sportradar). But treating the act of reception as a restricted act is a step too far. It was rejected in the Court of Justice’s decision in FAPL v QC Leisure as now eloquently confirmed by the Supreme Court in Meltwater. The Supreme Court has referred its decision to the Court of Justice so that there can be no doubt about the point and so that it can apply uniformly across the EU.
The Bogsch theory and the communication to the public (CTTP) right
The key feature of the new European regime is that it rejects the country of origin principle or “emission” theory of electronic distribution, a vogue for which led in the early 1990s to Directive 93/83 (the Satellite and Cable Directive) and the application to satellite broadcasting of only the law of the country in which the signal originated. It embraces instead a much broader set of principles and has returned in effect to 1985 and the perceptive views of the late Dr Arpad Bogsch, the then Director General of WIPO, on the copyright implications of direct broadcasting by satellite. Those views were developed in 1986 by a joint UNESCO/WIPO committee and were confirmed in 1988. The committee took the position that, under the copyright conventions, a “making available” within the concept of CTTP takes place both where signals are emitted and where they are capable of being received. This came to be known as the Bogsch theory and was often characterised as applying the law of the country of reception. It was widely derided as impractical. In fact it had nothing to do with the concept of reception, transmission for public reception not being the same as actual reception. Now the wheel has turned full circle and a CTTP has been held to take place at least in the country where members of the public are targeted: Football Dataco v Sportradar.
The turning of the wheel leaves some anomalies behind it, including the treatment of satellite broadcasts under Directive 93/83. This will need to be sorted out but treating interventions by intermediaries as CTTPs already diminishes their effect.
Reception and the reproduction right
In Meltwater, the issue was whether reception itself involved a restricted act under copyright. That possibility arose because the screen display on a user’s computer might infringe the reproduction right in the transmitted content, as might the holding of fragments of the content in temporary caches or buffers within the computer. The case concerned written text but the same principles would apply to television and most forms of copyright content distributed on air or over the internet. The question was whether any such reproduction was covered by the exception for temporary copies as part of the technological process of reception that had been introduced by the Information Society Directive in 2001. The High Court had held that it was not and its decision had been upheld on appeal. Then came FAPL v QC Leisure which went the other way, as now explained and applied by the Supreme Court, subject to the reference to the Court of Justice.
The practical upshot is that, subject to sorting out some anomalies and the Court of Justice’s confirmation, the distribution of content is protected by the CTTP right in both the country of emission and the countries where members of the public are targeted, but reception for the purposes of mere browsing or private viewing is beyond the scope of copyright protection. Television viewers need no copyright licences. Browsers do not need EULAs (end user licence agreements) so long as they do not save copies, print stuff off or do any other act that is protected by copyright. It is a coherent scheme.
Author: Tony Ballard
A remarkable document emerged from the European Parliament at the end of January. It is styled “DRAFT REPORT on connected TV”. It is not, however, a report but consists of a motion for a resolution calling for radical regulatory change, along with an explanatory statement.
Regulating connected TV
The changes are aimed primarily at user interfaces on internet-connected devices, that is to say the home pages or screens from which the user navigates to access television content. The concern is that those who control the interface will be the gatekeepers to viewable content. The resolution says that they may discriminate against content providers, by which it probably means public service broadcasters (PSBs). It calls not only for protection against discrimination but also for PSBs and others to have a privileged status as to findability. Those aspiring to the highest standards of reporting and diversity should, it says, have the most prominent position. Along the way it also calls for the scope of television regulation under the AVMS Directive to be based more on the potential impact of the services and in particular their impact on opinion-forming and diversity.
The underlying theme appears to be a concern that unregulated development of user interfaces on connected TVs will somehow jeopardise the diversity of opinion which current media provide and which contributes to the functioning of democracy. The fear is that device manufacturers or others who control the home screen on a device will be able to control what users can access and that they will either leave out PSBs and the like, or will make them harder to find, and that either way there will be a detriment to democracy.
How far this initiative is evidence-based is unclear. The document recites as a fact that, in the digital environment, linear broadcasts have hitherto met with “incomparably greater interest” from the public than other electronic media services. Some might find that to be something of an overstatement and might wonder whether it really follows, as the resolution suggests, that linear broadcasts will for that reason continue to have “outstanding importance for individual and public opinion-forming … for the foreseeable future.”
Stripping away the hyperbole (if that is what it is), there remains a serious point. It could be that the public service channels will not appear in a prominent position or at all on the user’s home screen. Should there be controls in this respect?
The industry does not seem to think so, judging from a position paper published in March by DigitalEurope, an industry lobbying group. In a damning critique of the proposal, the paper suggests that it is misconceived and would stifle innovation.
The European framework
The resolution calls for amendment of the relevant European framework and the AVMS Directive in particular so as to enable regulation of the relevant service providers. Both sides appear to have overlooked the fact that the necessary regulatory powers are already in place, albeit not in the AVMS Directive.
Under the Access Directive, part of the electronic communications framework package of Directives, national regulatory authorities (NRAs) are already able to impose obligations on operators to provide access to application program interfaces (APIs) and electronic programme guides (EPGs) on fair, reasonable and non-discriminatory terms “to the extent that it is necessary to ensure accessibility for end-users to digital radio and television broadcasting services specified by the Member State” (in other words, the must-carries) and the same Directive recognises Member States’ ability to impose obligations in relation to “the presentational aspect of electronic programme guides and similar listing and navigation facilities”. Indeed, the Recitals to the Directive show that the draftsmen of the legislation were fully on the case. The Recitals say, for example, that: “Competition rules alone may not be sufficient to ensure cultural diversity and media pluralism in the area of digital television … [and regular reviews are necessary] … to determine whether there is justification for extending obligations to new gateways, such as [EPGs] and [APIs] to the extent that is necessary to ensure accessibility for end-users to specified digital broadcasting services.” The reviews might be either by a Member State or the Commission.
Against this background, the call for legislative change, at least at the European level, appears unnecessary. But along the way it does raise some novel issues.
Individual and press freedoms
First, the focus on receiver devices leads the resolution to call for the controls to be applied to manufacturers. They, of course, are not service providers. They provide goods, not services, and they are regulated by a Directive that the resolution fails to mention, the Radio and Telecommunications Terminal Equipment Directive. But where there is no service provider involvement, it is difficult to see a compelling case to interfere with the design of a device and thereby to limit the freedom of the individual purchaser to program the device as he or she wills.
Second, it calls for an extension of the scope of television regulation by developing the concept of media services (sic) in the AVMS Directive according to their impact on opinion-forming and diversity. Newspapers at least should be alert to this development. If it were adopted, it would bring their websites within scope of television-style regulation. In the UK, it would overturn Ofcom’s decision in the Sun Video case, in which it decided that the video portion of the website of The Sun was not subject to regulation by ATVOD as an on-demand programme service.
Third, as an extension of the second, it could undermine the (reasonably) well-understood distinction between newspaper and television reporting. Under the Editors’ Code, newspapers must take care not to publish inaccurate information but they can be as opinionated as they please. In contrast, under the Broadcasting Code, broadcasters must observe due impartiality in news and current affairs. Enlarging the scope of TV regulation on the basis of opinion-forming and diversity criteria would, in the UK at least, be an invitation to regulators to apply the impartiality rules to their enlarged territory. That may or may not be a good thing but it needs serious debate. Is there a public benefit in preventing electronic versions of newspapers from exercising the freedom to be opinionated?
Author: Tony Ballard
The government is proposing that offshore providers of online gambling services should be licensed if they wish to target UK punters. It is not clear how such a scheme could work. If the government is thinking of regulating the providers of online TV from outside the EU in the same way in the upcoming Communications Bill, it should think again.
Problems of jurisdiction are not limited to gambling. A Playboy company has recently been fined a total of £100,000 by Ofcom for failing to comply with ATVOD regulations in relation to two adult on-demand television services. Having now transferred the services to a non-UK company, it may now escape UK jurisdiction although this remains a contentious issue with ATVOD. If the transfer is effective, it will be entitled to continue to provide unregulated porn to online punters in the UK since regulation is contingent on the service providers being subject to UK jurisdiction.
The Radio Caroline solution
Unregulated service providers located beyond the jurisdiction of the UK have a colourful history. In the 1960s, Radio Caroline provided radio services from a boat anchored off the Suffolk coast outside UK territorial waters and beyond the reach of the Wireless Telegraphy Act. Amendments to the legislation were introduced making it a criminal offence to do a number of acts within the UK which would sustain pirate operations of this kind, whether by buying advertising airtime or even by supplying sandwiches for the crew from Harwich.
In the 1980s, concern about pornographic satellite television services uplinked from Holland led to amendments to the Broadcasting Act modelled on the Radio Caroline precedent, extending the list of sustaining acts to include the sale of decoders. Now all sorts of services are available from abroad on the internet and, to protect children from online pornography, there are calls for similar legislation prohibiting banks in the UK from meeting payments charged by punters to their credit cards.
A point of consumption solution
In the meantime, facing a similar problem in a different sector, the government has embarked on a different legislative solution. It proposes to regulate online gambling on a point of consumption basis by making it an offence to provide gambling facilities without a Gambling Commission licence if the facilities are merely “capable of being used” in Great Britain. Off-shore operators, it is said, will need to block internet access for customers here if they do not want a licence. It has circulated a draft Bill to this effect for comment.
Nothing appears to have been said about whether this solution might be applied to the audiovisual sector but, perhaps prompted by the banks, it is not difficult to guess that a solution along these lines is also being considered for inclusion in the upcoming Communications Bill. That would mean regulating television from outside the EEA on a point of consumption basis. If so, and if the solution finds favour with the Bill team, we may expect that, instead of attacking unlicensed service providers through the banking system on the model of the Radio Caroline legislation, the Bill will impose criminal liability on foreign operators if their services are capable of being used in the UK unless they are licensed by Ofcom or regulated by ATVOD.
This solution could not apply to service providers in EEA states thanks to the jurisdiction rules in the AVMS Directive but it would apply to service providers in the US, Canada, Russia, Japan and elsewhere. It would also conveniently fill a gap left by the AVMS Directive, which does not say what Member States should do about service providers with no establishment in the EU and which do not use EU satellite links but whose services are capable of being used by EU audiences.
The solution would only work, however, if there were someone in the UK for the authorities to prosecute in the event of non-compliance. The arm of the criminal law does not readily extend beyond the UK’s territorial limits. That is no doubt why the Radio Caroline solution was framed as it was, making it an offence to do things within the UK to sustain a service provider who was otherwise out of reach.
Under the Gambling Act as amended, it would be an offence to provide online gambling facilities in any part of the world if they were “capable of being used” here. That in itself would not unduly alarm a foreign service provider who was out of reach of the UK courts. Assuming that it was a company, it would also be an offence by an officer if the offence were committed with his or her consent, connivance or negligence. That would be an inconvenience for directors who would have to avoid travelling to the UK but is unlikely to be a deterrent. But unusually the Gambling Act goes further, treating a shareholder as an officer if the company’s affairs are “arranged” by its members, whatever that means. That would be likely to be more than an inconvenience for companies with substantial UK shareholders, especially those UK companies with household names whose offshore subsidiaries provide most online betting services in this country. The unusual extension of liability to shareholders means, in practice, that the solution may work in the gambling industry in its present form.
TV Online from beyond the EU
The same would not be true, however, of the television industry. Unlike in gambling, the big UK players have not chosen to go offshore. The affairs of those foreign providers of online TV content to whom the new regime would be applied are unlikely to be “arranged” in the UK. They would be controlled and managed elsewhere and the directors would make their holiday and business travel plans so as to avoid being stopped at the airport. The solution would not work in the television industry.
Ultimately it seems unlikely to work in the gambling industry either, since companies in foreign ownership are unlikely to be deterred and may indeed have a competitive advantage over UK-regulated operators. The Radio Caroline model appears to remain the only plausible solution.
Author: Tony Ballard
This blog explores a possible reform of the UK TV licence fee system along the lines now being pioneered elsewhere in Europe. It would involve assimilating the fee to some extent with the tax system, which has been resisted in the past because of concerns about editorial independence from government but which might better reflect the democratic and universal service aspirations of public service broadcasting (PSB) than the current system as well as responding to the new pressures of digital media.
The TV licence fee in the UK is currently payable by households which watch live television, that is to say households with reception equipment used for receiving television services that are organised in a linear sequence or schedule. It is not payable for on-demand access, that is to say where content is not consumed passively but is selected and consumed actively through search and demand from a much wider range of sources than the scheduled services. As government has long recognised, if large numbers of people access content actively from the internet instead of from the scheduled services, changes to the existing funding model may have to be considered.
There has always been pressure for change. The licence fee is regressive, it fails to reflect the BBC’s falling audience share, it cross-subsidises radio, new media and the BBC’s non-programming activities, the costs of collection and evasion are high and enforcement is often unpopular and clogs the magistrates’ courts. But the trend towards on-demand access in patterns of consumption is a new factor.
One way forward would be to recognise that linear and on-demand services are two sides of the same coin and to extend liability for the licence fee to on-demand access. There is some merit in this. A broadcaster is ultimately a provider of programmes, whatever the means of delivery. The public finds them by looking at an EPG or the Radio Times to see where they are in the linear schedule or by using a more sophisticated search engine such as Google. In other words, there is ultimately no fundamental difference between linear and on-demand services. It is all a matter of making content available. To some extent this is recognised in the AVMS Directive but that is not the case in UK law where the UK implementation of the Directive, in a retrograde step, applies a different, stand-alone regulatory framework to on-demand services.
Such a change would not address other more long-standing concerns. A more radical rethink is required.
The licence fee model has its roots in the 1920s when radio manufacturers promoted broadcasting as a means of selling radios and the government contributed part of the revenues from the grant of receiver licences under the wireless telegraphy legislation to pay for the programmes. PSB grew from this unpromising beginning into a Europe-wide phenomenon whose funding mechanism is protected by a Protocol to the Treaty. The BBC now aims, as the first of its public purposes, to sustain citizenship and civil society. It would be absurd to suggest that this is intended to benefit only licence fee payers, that is to say only those who watch linear television. The benefits extend to the community as a whole. In these circumstances, the case for the BBC to be funded from general taxation would be overwhelming if it were not for concerns about its independence from government.
Does the concern about independence mean that the UK must struggle on with the monthly or annual collection of a regressive impost on the 97% (according to BARB’s figures) of TV-owning households, subjecting any home on the TV Licensing database for which a licence has not been obtained to computerised correspondence and despatching detector vans to analyse the light escaping through their windows? Is there not a better way to collect unpaid fees than through the magistrates courts, 10% of whose cases (according to Ministry of Justice figures) are prosecutions for evasion?
France and Finland
Most countries in Europe require households, one way or another, to pay to support PSB. In the UK and some other countries the payment is called a licence fee but it is in effect a hypothecated tax on households (and was recognised as such by Auld LJ in his review of the criminal courts in 2001). In France, any pretence that it is not a tax has been abandoned by assimilating its incidence and collection with the taxe d’habitation. The taxpayer is deemed to have a TV receiver and is therefore liable for what is now called a contribution à l’audiovisuel unless a declaration to the contrary is included in his or her annual tax return.
Now Finland has gone one step further. From 1 January this year (2013), the household licence fee has been replaced by a new PSB tax payable by every taxpayer, irrespective of ownership of a receiver, in a band between €50 and €140, based on 0.68% of taxable income. Those who earn less than €7,352 a year do not pay and those who earn more than €20,588 pay a flat €140. The tax will be used to cover an appropriation from the State budget to a TV and Radio Fund, which in turn will fund Finland’s PSB, thereby maintaining a degree of independence by keeping the funding at least one step away from government.
The way forward
So could the UK follow the Finnish example? It would certainly hit a lot of buttons.
First, it would include mechanisms to maintain broadcasting independence. The current 10-year cycle of negotiation between government and the BBC is not the only possible mechanism to maintain independence and it is not obvious that it is the best or indeed particularly resilient.
Second, it would avoid distinguishing between linear and on-demand services.
Third, it would not need to be linked specifically to television but could extend to radio, online and other activities.
Fourth, it would make collection efficient, avoiding the indignities of computerised correspondence and detector vans as well as the endless clogging up of magistrates’ courts.
Fifth, it would reduce the regressive nature of the current fixed fee, by linking the payment to some extent to ability to pay.
Sixth, it would be consistent with the principles of PSB both in the UK and Europe. As recited in the protocol to the Treaty, PSB is concerned with the democratic, social and cultural needs of each society and the need to preserve media pluralism. These are public benefits to be enjoyed by all.
Last and not least, it might foster the perception that public service broadcasting is less a state-sponsored means of supporting the BBC and more a contribution towards the cost of sustaining citizenship and civil society generally.
As other countries in Europe explore reforms of their licence fee systems, the UK currently risks falling behind the debate. Perhaps the Government will address this in their proposals for the upcoming Communications Bill.
Public service content
Achieving the aspirations of PSB depends on funding and that in turn depends on the acceptability of the licence fee. It is often described as the least worst form of funding but that is by way of comparison with advertising, subscription and direct government grant. Those are not today’s issues. Within the licence fee concept itself there is room for improvement in terms of scope, efficiency and fairness. Adapting the concept to today’s conditions could promote acceptability of the funding mechanism and thereby contribute to the vitality of a principle that has served the UK and Europe well. It needs to be fostered if it is to continue to command a general public consensus as it develops from passive public service broadcasting to the active world of search and demand for public service content.
Author: Tony Ballard
“For good faith users, orphan works are a frustration, a liability risk, and a major cause of gridlock in the digital marketplace” (US Copyright Office 22 October 2012).
The US Copyright Office is currently consulting on possible next steps for orphan works in the US after draft legislation in 2006 failed to get enacted. In the UK, powers for the government to grant licences for the use of orphan works in the absence of the missing copyright owner were included in the Digital Economy Bill, but they also failed to get enacted, having been lost in the wash-up at the end of the last Parliament.
Now the European Union has intervened with Directive 2012/28 (adopted 25 October 2012). Its origins lie in the Digital Agenda for Europe and the aspiration for a digital single market. When implemented, it will create a new exception from copyright to allow certain public institutions to copy orphan works and to make them available to the public in pursuit of their public-interest missions. This is good news so far as it goes, especially for public service broadcasters, but that is not very far. The limited scope of the Directive, addressing as it does only the public services, leaves unsolved the problems of those who wish to make lawful commercial use of orphan works.
Not content with this limited initiative, the UK is striking out boldly on its own. The Enterprise and Regulatory Reform Bill, which is about to enter its Committee stage in the House of Lords having passed through the Commons, contains a clause dealing with orphan works. It is clause 68. It will, if enacted, give Ministers power to make regulations for the licensing of orphan works. The regulations would authorise some specified person or persons to grant licences to do any act in respect to them that would otherwise require the consent of the missing owner – in other words, to grant licences for their commercial use. It is bold because, by taking powers to legislate by regulation, the government is once more proposing to reform parts of copyright law without Parliamentary scrutiny. It is also bold because licensing orphan works does not appear to be permitted by the Information Society Directive. Furthermore, a national measure of this kind, unless followed by other EU countries, is likely to create the kind of differences in protection, restrictions on the free movement of services and re-fragmentation of the internal market that the Information Society Directive was introduced to prevent. It is hard to believe that this clause is going to reach the statute book or, if it does, that it will not be challenged.
A judicial solution?
The UK government is not, however, the only source of bold initiatives in copyright these days. Having got the copyright bit firmly between its teeth, the Court of Justice of the EU has taken a novel approach to copyright, one of the consequences of which could be that the use of orphan works in appropriate circumstances does not infringe. If that is right, clause 68 may not be needed. As explained in an earlier blog, the Court has held that copyright is a restriction on the freedom to provide services which is justifiable only so long as it does not go beyond what it is designed to protect and does not conflict with the fundamental aims of the Treaty. This is a new application of an old rule dating at least from the Centrafarm v Winthrop decision in the 1970s (in which it was held that property rights protected by the Treaty permit derogation from the fundamental principle of free movement but only to the extent necessary for the protection of the rights constituting the specific object of the exception). Applying this principle and relying on Recital (10) of the Information Society Directive, the Court has even held that rightholders should receive only “appropriate” remuneration. Recognising that records, films/multimedia products and on-demand services and the like require considerable investment to produce, Recital (10) also says that legal protection of IP rights needs to be “adequate” to guarantee the rightholders’ remuneration and returns on the investment. It is not difficult to see what the Court might make of this.
The qualification of adequacy is consistent with the way in which the Court has held that the free movement principle precludes the use of IP rights to partitition the single market (FAPL v QC Leisure) and to prevent resales of items by a purchaser who has paid their full economic value to the rightholder (Oracle v UsedSoft). Could that principle also preclude the use of IP rights in orphan works if the use is, as in the US, a frustration, a liability risk and a major cause of gridlock in the digital marketplace for good faith users?
Suppose, for example, a broadcaster (other than a public service broadcaster, which will shortly have the benefit of the new Directive) has made and broadcast a programme and kept it in its archive. It now wishes to re-transmit or otherwise exploit the programme but cannot clear the rights of a single minor contributor because the contributor cannot be found. The lack of a single clearance may prevent all further exploitation of the programme and thereby block any prospect of the remuneration or returns for the authors, the performers and the producers that the European legal order is meant to foster. It is not as if the contributor’s work is unpublished – it has already been made publicly accessible in the original broadcast. Is it appropriate that legal protection of the copyright in the contributor’s work should preclude further use of the programme if the contributor cannot be found? Or would that go beyond what is appropriate or adequate?
The Court of Justice has applied the free movement principle to trump copyright in FAPL and to prevent rightholders extracting value unreasonably in Oracle. To hold that the free movement principle also trumps copyright in relation to orphan works would perhaps take the Court into new territory, although maybe not very far. How far can it go in balancing free movement against property rights?
A decision of the Court of Justice that, in an appropriate case, rights in orphan works are not enforceable in such a way as to prevent further use of works which have already been made publicly accessible by the author would provide an EU-wide solution. It looks as though clause 68 of the Bill, which appears to be outside the letter and principle of the Information Society Directive, would not.