Art & Allposters: No decision yet from the Court of Justice on the exhaustion principle in relation to digital downloads
Author: Tony Ballard
Can digital downloads be sold second-hand without a licence from the copyright owner? That is a question to which practitioners in the field urgently need to know the answer. The question has arisen because the decision of the CJEU in UsedSoft may open the way to purchasers selling their digital collections free from copyright restrictions on the basis that the distribution right in relation to them has been exhausted.
It is not therefore surprising that the decision of the CJEU last week in Art & Allposters has attracted much attention. It was a decision on a reference from the Dutch Supreme Court in a case involving exhaustion. The case was not, however, concerned with digital products. It concerned tangible articles - reproductions of a protected work which, having been placed on the market in the EEA with the copyright holder’s consent in the form of paper posters, had been marketed by a purchaser in a new form – the ink bearing the image of the work had been transferred from the paper onto a canvas, thereby achieving a significant increase in its value.
Having searched the decision for clues as to how the Court might approach the larger question of the treatment of digital downloads, at least one commentator has suggested that the Court may have implied that there is no such thing as a general digital exhaustion under EU copyright and that the decision in UsedSoft was possible only because of the lex specialis nature of the Software Directive. But as that commentator herself acknowledges, it is not clear that the UsedSoft dragon (if that is what it is) has been slain.
The exhaustion principle
The principle of exhaustion in copyright law has been developed by the Court since Grundig and Consten in the 1960s in relation to the distribution of tangible articles. The case law of the Court has always, however, treated it as an expression of certain more fundamental principles concerning the internal market. What is exhausted is an intellectual property right. Such a right is a restriction on the fundamental freedoms of movement (of both goods and services) but can be justified if it is to safeguard the specific subject-matter of the right. Where the specific subject-matter is the opportunity to exploit the right commercially and where, as in the sale of goods, the rights holder has realised the economic value of the right in respect of a tangible article on its sale within the EU, the right is said to be exhausted.
That principle has been codified in relation to goods in Article 4(2) of the Information Society Directive. But why should not the same principle apply in other fields in which an IP right is exploited? That is the question posed by A-G Kokott in her Opinion in FAPL, as we have discussed elsewhere, and which the Court appears to have answered in part in its decisions in FAPL and UsedSoft by examining copyright questions in this wider context of restrictions on those fundamental freedoms and by treating them as justifiable to the extent that they enable the rights holder to realise the economic value of the relevant right (and not, therefore, justifiable to the extent that they go further).
Interpretation of Article 4(2)
In Art & Allposters, it was not necessary for the Court to explore the boundaries of the exhaustion principle because the case involved posters and canvases, which were tangible articles that fell squarely within Article 4(2). What was novel in the case was the relationship between the protected work and the paper on which it was originally printed. The defendant had bought the poster and had then lifted the ink from the paper and transferred it to a canvas for marketing. The question was whether in those circumstances the copyright owner’s rights were exhausted in relation to the new object which now incorporated his work. The Court held that it was a different object from that which had been placed on the market with the consent of the rights holder. Consequently it was outside the scope of Article 4(2). It was a matter of legislative construction.
But the Court did not stop there, as it could have done. Instead, it went on to put the matter into a wider context. It said that its interpretation of Article 4(2) is supported by the principal objective of the Directive – to establish a high level of protection and to enable authors to obtain an appropriate reward, that is to say remuneration which is reasonable in relation to the economic value of the exploitation of the protected work. To apply the principle of exhaustion of the distribution right would deprive the rights holder of the opportunity to obtain an appropriate reward. As regards canvas transfers, the parties had acknowledged that their economic value significantly exceeded that of posters.
In other words, having been able to decide the question on the basis of the wording of the Directive itself, the Court went on to show that the decision was consistent with the broad principles that it had explained in FAPL and UsedSoft to the effect that copyright restrictions are justifiable to the extent that they enable the rights holder to realise the economic value of the relevant right. As a result, far from moving back from its excursion into the fundamentals of copyright law in FAPL and UsedSoft, it appears that the Court is signalling that its approach has not changed.
It is true that, at one point in the judgment, the Court appears to say something to the contrary. It says that Article 4(2) does not leave it open to the Member States to provide for an exhaustion rule other than that set out in that Article, to the extent that differences in the national laws governing exhaustion are likely to affect the smooth functioning of the internal market. But that is said in the context of possible differences between EU and Dutch law, as is clear from its reference to its decision in Laserdisken to the effect that it is not open to Member States to have a rule of exhaustion other than the Community-wide exhaustion rule. It is not easy to read into this passage anything that indicates that the Court is thinking of recanting its views on the fundamentals. So it appears that practitioners must await either some further decision of the Court or, conceivably, legislative change to clarify the matter.
26 January 2015
Parody and the European project: Is the decision of the Court of Justice in Deckmyn another step towards harmonisation and an ever closer Union?
Author: Tony Ballard
On 1 October 2014, fair dealing with a work for the purposes of caricature, parody and pastiche ceased to infringe copyright in the work in the UK. This was thanks to the coming into force of one of the several new exceptions from copyright that have been introduced after Hargreaves. It was introduced by statutory instrument in exercise of powers under section 2(2) of the European Communities Act, implementing the UK’s option under Article 5(3) of the Information Society Directive to make an exception for “use for the purpose of caricature, parody or pastiche”. The meaning and scope of those expressions are not defined.
Deckmyn v Vandersteen
A few weeks earlier, fortuitously, the European Court of Justice delivered judgment in Deckmyn v Vandersteen on the meaning of “parody”. It held that parody consisted essentially of two relatively straightforward characteristics: first, to evoke an existing work while being noticeably different from it and, second, to constitute an expression of humour or mockery.
But that was not all. To hear the case, the Court had exceptionally constituted itself as a Grand Chamber of 15 judges. Plenary sessions of this kind are usually reserved for the most important cases. It sat as a Grand Chamber, for example, in the seminal FAPL and UsedSoft cases. The decision to sit in the same way in Deckmyn is probably a clue as to the perceived importance of the issues. It seems unlikely that parody itself or its meaning would have been an issue that would command that kind of attention. The important issues must lie elsewhere.
Clues as to the important issues emerge from the judgment in its opening paragraphs. It sets out a number of Recitals to the Directive, beginning with Recital 3 which speaks of the harmonisation proposed by the Directive helping to implement the four freedoms of the internal market. It is fundamental stuff. The Recital goes on to speak of the harmonisation relating to compliance with “fundamental principles of law … including intellectual property … freedom of expression and the public interest”. It sets the scene for a judgment that rises above the humdrum business of delineating the meaning of words and links the exception to the fundamentals of the European project.
Building on its decision in FAPL, the Court said that the interpretation of the concept of parody must enable both the effectiveness of the exception to be safeguarded and its purpose to be observed. As to purpose, it recalled the fundamentals to which it had referred earlier in the judgment. It also recalled the reference to fair balance in the Recitals to the Directive. It concluded that the application of the exception in any particular case must strike a fair balance between the interests and rights of rights holders on the one hand and the freedom of expression of the user on the other, taking all the circumstances into account.
An illustration of what it had in mind by “all the circumstances” was helpfully given by the Court. The parody that was in issue in the case was based on a drawing which showed a figure throwing coins about for people to pick up. In the parody, a politician was doing the same and the coins were being picked up by “people wearing veils and people of colour”. This conveyed a discriminatory message to which the Court indicated the Equal Treatment Directive and the Charter of Fundamental Rights might be relevant and which the national court would have to assess. The circumstances that the Court had in mind plainly included not only the factual matrix in which the case had arisen but also the acquis communautaire. Associating the protected work with a message that was discriminatory under those other European instruments engaged the legitimate interest of the rights holders under the Information Society Directive.
The European project
This is a Court which, as we have observed elsewhere, has shown itself to be minded to return to single market fundamentals in relation to copyright. It has approached copyright as a restriction on single market freedoms which is to be upheld only to the extent that doing so is justified, thereby putting remarkable powers into the hands of the Court to say what will be protected and what will not, and opening the way to a judicial remoulding of copyright law in a far more radical way than was ever contemplated by such cases as Magill. The significance of its decision in Deckmyn may therefore be much wider than the parody exception itself. In its present fundamentalist mood, it may be that the Court’s purpose in applying Grand Chamber treatment to the Deckmyn case is to make it clear that, whatever the nature of an exception from copyright, it must be applied in such a way as to strike a balance between the interests of rights holders and users in a way that reflects EU law. In other words, the application of the exceptions is to be harmonised, even if the exceptions themselves are not.
If that is right, the decision may assist with resolving some practical doubts about how the courts should take account, if at all, of the requirements of Article 5(5) of the Information Society Directive (even though Article 5(5) was not in issue in the case, as the Advocate-General pointed out in his Opinion). The mandate to apply exceptions only to special cases which do not conflict with normal exploitation and do not unreasonably prejudice the legitimate interests of the rights holders could then be left as an instruction on to how to frame the relevant legislation and not how to apply it. On the other hand it may also create some doubts if it means that the application of an exception would always be contingent rather than certain, depending on how the balance is weighed among competing interests against the background of the wording and purpose of European law.
But it is difficult to resist the conclusion that the main driver of the decision is the founding principles of the Union and an attempt by the Court to continue its shaping of copyright law, and the exceptions from it, in a way which reflects and promotes the European project underlying the Treaties. Copyright in the hands of this fundamentalist Court may be taking a new shape.
24 October 2014
Author: Tony Ballard
As Einstein might have said, the European Court of Justice is subtle but not malicious. Like nature, it hides its secrets. Or so it may appear to practitioners when trying to understand the Court’s recent judgments on the communication to the public (CTTP) right in copyright. But those secrets are gradually coming to light and more have now been revealed unexpectedly in the context of a decision on the reproduction right.
Public Relations Consultants Association Ltd v Newspaper Licensing Agency Ltd and ors
As has been suggested elsewhere in this blog, the CTTP right may be displacing the reproduction right as the key feature of the copyright regime in Europe (if not in the world) as electronic distribution displaces its physical counterparts. The rise of Spotify, Netflix and other streaming services is an obvious example of the phenomenon. This is because it is primarily the CTTP right that is engaged when content is distributed on the internet, a point confirmed and emphasised by yesterday’s decision of the CJEU in PRCA v NLA (otherwise known as the Meltwater case). That was a decision mainly on the reproduction right, to the effect that that right is not engaged by the act of reception of a protected work because copies made automatically by and for the user’s computer internet cache and display are within the temporary copying exception in Article 5(1) of the InfoSoc Directive. But the decision involved also a consideration of the CTTP right.
The communication to the public right
After a series of ground-breaking decisions, from Rafael Hoteles to TVCatchup via FAPL, the Court appears to be treating the meaning of the CTTP right as settled. But some of its subtleties have eluded ordinary mortals until the secrets of these somewhat Delphic judgments are revealed, as happened in the unexpected (at least in some quarters) decision in April in Svensson.
Now in Meltwater, the Court has raised its skirts a little more to reveal other secrets of the CTTP right. That may seem surprising because the decision in Meltwater is all about an exception from the reproduction right. The Court held, however, that the exception has to be read in the light of the three-step test in Article 5(5) which in turn requires the Court to consider the legitimate interests of the rights holders, as to which it said:
“… it must be pointed out that the works are made available to internet users by the publishers of the websites, those publishers being required, under Article 3(1) of Directive 2001/29 [the InfoSoc Directive], to obtain authorisation from the copyright holders concerned, since that making available constitutes a communication to the public within the meaning of that Article.
The legitimate interests of the copyright holders concerned are thus properly safeguarded.
In those circumstances, there is no justification for requiring internet users to obtain another authorisation allowing them to avail themselves of the same communication as that already authorised by the copyright holder in question.”
We glimpse a number of things here. First, we see a little more of the Court’s thinking about the CTTP right itself. Unlike some other restricted acts under copyright, the Court is treating a CTTP as not divisible by the copyright owner. The act of making available is inseparable from the act of reception. When a rights holder makes a work available to the public on the internet, the act of receiving requires no separate authorisation or licence.
Second, we see the Court requiring reliance on the reproduction right to be “justified”. This is the Court applying the new (or strictly speaking refreshed, since the key decisions go back to the early days of the Community) perception that copyright is a derogation from fundamental principles and requires justification. When it says in this case that there is no justification for requiring internet users to obtain another authorisation, it appears to be applying that perception and the consequences that flow from it.
One well-established consequence is the concept of exhaustion. That is a concept that is generally limited to distribution, but it rests on that same perception according to which copyright is not justified if it goes beyond what is necessary to safeguard the specific subject-matter of copyright, which includes the right to “appropriate” remuneration. What the Court is saying in this case is that using the reproduction right to extract value from users when the economic value of the communication has already been extracted on the grant of the CTTP right would not be justified because it would go beyond what is necessary to extract appropriate remuneration. That is why allowing the user to rely on the temporary copying exception under Article 5(1) does not prejudice the legitimate interests of the rights holders.
The reasoning is in line with the Court’s development of the idea of copyright as a derogation from fundamental Treaty principles as we see elsewhere, such as in UsedSoft, where it led to the overriding not only of the reproduction right but of contractual restrictions as well.
Still partly hidden under the Court’s skirts is the impact of this new perception on contractual restrictions. When and to what extent does the new approach mean that contractual rights are overridden? The point has arisen one way or another in such major cases as FAPL and UsedSoft and the UK government has adopted it as a general theme in the framing of the recent new copyright exceptions. It is likely to arise in practice as new means of access to streamed content emerge.
Suppose, for example, that a rights holder, such as a record company, imposes on its licensee, such as a website operator, a requirement that the licensee imposes on its users a restriction against onward transmission of music from the receiving device to other devices in the home or elsewhere (such retransmission not being necessarily an act restricted by copyright), would that restriction be overridden or not? This is the kind of live question to which final answers remain to be revealed by the Court.
6 June 2014
Author: Tony Ballard
The new copyright exception for private copying is intended to allow consumers not only to copy content to different devices for private use but also to use new storage solutions such as the cloud. The Government has indicated that the exception will remove the need for service providers to obtain licences from rights holders for the provision of online cloud storage facilities for personal copies made by individuals pursuant to the exception.
The exception is being introduced by the Government using powers under the European Communities Act. It is due to come into force on 1 June 2014. It has yet to get Parliamentary approval and it may be controversial enough in some quarters to attract a challenge by way of judicial review. But assuming it overcomes these obstacles, it will be in the form of draft Regulations that the Government has recently tabled.
No exception for service providers
There is a puzzle to be solved here. The exception in the draft Regulations is an exception from the reproduction right in favour of individual consumers. The wording is such that it does not (and cannot, thanks to Directive 2001/29) apply to service providers. It applies only to individuals who make their own copies of copies that they have lawfully acquired. How then can unlicensed service providers create further copies on their servers when providing those individuals with cloud storage facilities without themselves infringing the reproduction right in the relevant works?
It is clear that the policy is to permit cloud storage services to be provided without the service provider having to obtain a licence from rights holders. It is also, however, clear that the exception does not and cannot extend to the service provider. How then can the policy objective be achieved when the exception does not extend to them? Or, more practically, what defence is available to the service provider if it is sued by rights holders for reproducing their works on its servers without their consent?
The customer as the maker
The Government says that the exception would apply “to storage by the owner on any device or media over which they have control (eg. a cloud locker)”. But storage in the cloud inevitably involves an act of reproduction when a copy is made on the service provider’s servers. Who makes the copy?
It may be that the Government thinks that reasoning similar to that in Cartoon Network v CSC Holdings and Cablevision should apply. That was the US Court of Appeals’ decision in which the provider of a cloud service was held not to infringe the reproduction right in copied works on the basis that the copies were made by the customer under the customer’s control.The reasoning in that case was followed in Singapore in RecordTV v MediaCorp. Both of them were cases in which the making of the relevant copies was initiated exclusively by the customer. But customer control was rejected as a defence for the service provider in Australia on appeal in National Rugby League v Singtel Optus, where it was held that the copy made on the service provider’s servers was made by the service provider, notwithstanding that it might also have been made by the customer.
With no international consensus on whether copies made on the service provider’s servers are “made” only by the customer and not (or not also) by the service provider, it seems unlikely that the Government can have been relying on the UK and/or EU courts reaching the same conclusion, particularly as similar issues (concerning the outsourcing by users of home facilities) are notoriously up for decision by the US Supreme Court in Aereo.
The single market
It may instead be that the Government has relied on judicial reasoning closer to home. A clue may lie in the way the Government has described the benefits of and reasons for removing the need for a licence in its policy document. It says that the exception “is likely to reduce barriers to entry and enhance competition in this market, supporting technological innovation and economic growth. It would mean that providers of such storage are put on an equal footing with providers of digital device storage (such as hard disks and mobile phones) and physical storage (such as bookcases and CD racks), who are not currently required to pay for the right to store copies owned by consumers. Likewise, consumers would avoid paying additional fees when storing remotely content they have already paid for.” The clue lies in the echoes of European themes of trade barriers, technological neutrality and the exhaustion of rights. The Government may therefore be thinking of recent decisions in the CJEU which have been drawing new boundaries for the scope of copyright in pursuit of the completion of the single market. Maybe it has taken the view that online cloud storage of permitted personal copies is outside the scope of copyright altogether.
The Court of Justice has made it clear that a restriction which derogates from the fundamental freedom to provide services cannot be justified unless it serves overriding reasons in the public interest and is proportionate. Protection of IP rights is one such justification and the ability to secure appropriate remuneration is likely to be proportionate if it is reasonable in relation to the economic value of the service provided. But the right to secure that remuneration in relation to particular copy of a work may be exhausted once its economic value has been fully realised. This principle, well-established in relation to the distribution of goods, is being adapted to the new forms of electronic distribution as we have discussed elsewhere in relation to the FAPL case and the decision in UsedSoft.
Where cloud storage is concerned, the Government relies on a pricing-in hypothesis to the effect that the benefit of private copying is or could be priced in to the market through increased prices or sales. Whilst empirically the evidence is inconclusive, the Government has taken the view that costs to rights holders due to lost sales will be minimal or zero. If that is right, it would not be difficult to argue that, on the sale of copy of a work in say CD or download-to-own (DTO) form, its economic value had been realised and that it would be disproportionate for rights holders to be able to invoke copyright to require further remuneration to be paid in relation to any use of the copy by making personal copies of it for private use.
In other words, the service provider would not need an exception because rights owners would be precluded from enforcing the reproduction right in their works in relation to the copies made on its servers. Enforcing that right would be a restriction on the service provider’s freedom to provide services which would not be a justified derogation from that freedom. So the making of the customer’s personal copy on its servers would be beyond the scope of copyright altogether.
A year ago we speculated in this blog that the Court of Justice might be moving towards a US-style fair use principle in copyright law and might replace the current European patchwork of private copying exceptions with a common regime. If so, it is not difficult to see where the cloud service provider would stand at least in relation to personal copies made within the ambit of the currently proposed UK private copying exception. Does the Government know something that we do not know? Has it reached the conclusion that the Court of Justice would be bound to find in the service provider’s favour? Or is it leaving the industry to take a view? It ought to tell us.
28 April 2014
Author: Tony Ballard
As a footnote to our blog on the decision in Svensson, the CJEU yesterday delivered another judgment on what amounts to a “communication to the public” (CTTP).
In a case which once more involved an hotel, not in Spain (as in SGAE v Rafael Hoteles) but in the West Bohemian spa town of Mariánské Lázně (Marienbad), and in which the hotel company had installed televisions in its guest bedrooms, the question was whether the installation of the televisions amounted to a CTTP. The Court decided that it did: Case C‑351/12 OSA v Léčebné lázně Mariánské Lázně a. s.
Illusion and reality
Whilst at first sight giving the illusion of following the Spanish case, a different reality can be perceived in the Marienbad decision. In SGAE, the television signal was distributed by the hotel by cable to the guest rooms and the Court indicated that this was what we called in our Svensson blog a type-(ii) CTTP (based on the Berne Convention). In Marienbad, in contrast, it appears that there was no distribution of the signal by the hotel to the bedrooms but merely the installation of television sets. Was that sufficient to amount to a CTTP? The Court decided that it was, relying (for the key element) not on SGAE but on FAPL – the type-(iii) CTTP where the protected works were communicated to customers in the pub by loudspeakers and similar apparatus.
It is quite difficult to see how a type-(iii) CTTP differs from a public performance, conventionally a separate restricted act under copyright (and which is not harmonised by the InfoSoc Directive). Indeed they overlap.
The significance of this new decision may therefore lie in the way in which the public performance of protected works by television or any comparable technology (including presumably cinema projection) is being assimilated with the CTTP concept by way of Article 11bis(1)(iii) of the Berne Convention. If that is right, it means that the decision in this latest case has further enlarged the scope of the European harmonisation exercise on which the activist judges of the CJEU appear to have embarked.
28 February 2014
Communication to the public and the “new public” test: the Court of Justice puts its foot down in Svennson
Author: Tony Ballard
The decision of the CJEU yesterday in Svensson sets another boundary in the new European copyright regime for the distribution of content in electronic form. Clickable links to protected works that are freely available on another website do not infringe the communication to the public right in those works.
This simple proposition rests, however, on some fairly elaborate reasoning, resolving what had appeared to be divergent trends in the case law on how the key online copyright concept of “communication to the public” (CTTP) applies to the distribution of protected works in electronic form where a service provider intervenes between the broadcaster or host on the one hand and the user on the other. The reasoning is likely to affect fairly profoundly the development of this key concept. Remarkably, it has been set out in just 18 paragraphs of a short judgment, unsupported by a written opinion from the Advocate-General.
The earlier case law
The problem with which the relevant case law had been wrestling arose originally in connection with broadcasting. The Berne Convention gave authors the exclusive right not only to authorise (i) broadcasts of their work but also to authorise (ii) rebroadcasts by third parties and (iii) presentations of the original broadcast by loudspeakers and the like. A single broadcast might therefore involve three or more different kinds of CTTP. But some thought the Cable and Satellite Directive changed all that by eliminating (ii) and (iii) so far as CTTP by satellite was concerned.
In SGAE v Rafael Hoteles, the Court rejected such a reading of that Directive. The case involved the distribution of satellite broadcasts to hotel guests in their rooms. The intervention by the hotelier was held to be a type-(ii) CTTP, separate from the original broadcasts. It was an independent act through which the broadcast works were communicated to a new public, that is to say a different public from the one at which the original broadcast was directed. This was followed by Airfield, which involved the distribution of encrypted satellite broadcasts to a satellite package provider’s customers. The intervention by the satellite package provider was again held to be a separate type-(ii) CTTP on the same basis. A type-(iii) CTTP was considered in FAPL v QC Leisure, which involved the showing of satellite broadcasts on a television in a pub. The intervention by the landlady was held to be a communication to a new public of the works comprised in the broadcasts.
Unfortunately, the Court chose to express this relatively simple Berne-based schema in wording of exceptional obscurity and in association with the novel concept of the “new public”, which attracted adverse judicial, academic and other comment. So when in March last year it applied a new and simpler analysis in its judgment in ITV v TVCatchup and treated the earlier decisions as special cases turning on their own special facts, it looked as though those earlier decisions were being shunted off into a judicial siding. The case involved the redistribution by an intermediary of terrestrial broadcasts on the internet. The Court approached the question whether it was a CTTP in two steps. First, it took the view (consistent with Berne) that each transmission or retransmission by a “specific technical means” may give rise to a separate CTTP and held that internet retransmission was a different technical means and therefore a communication. Second, it held that it was directed at the general public. It was a CTTP and it was not necessary to consider whether it was a new public or not.
It is clear from yesterday’s judgment in Svensson that, far from relegating the earlier cases to judicial obscurity, the Court intends to combine the reasoning in the earlier cases with that in TVCatchup.
The question in Svensson was whether the provision by an intermediary of links to a freely accessible third party website that hosted protected works amounted to a CTTP. In answering the question, the Court has combined all these cases into a single analytic scheme, in which the treatment of an intervention by an intermediary between a broadcaster or online host and the viewer/user depends on whether or not the intermediary uses a different “technical means” to make the protected works available to the user. If (as in TVCatchup) an over-the-air broadcast is distributed by the intermediary on the internet – a different technical means – that distribution will be a separate CTTP if it is to the public, irrespective of whether it is a new public or not. If, however, the protected work is made available by a host on the internet and an intermediary provides access to it by the same technical means – the internet – the provision of access will be a CTTP only if it is made to a new public. In Svensson, the host site was freely accessible by the intermediary’s customers who could have accessed the works directly without the involvement of the intermediary. They were therefore part of the same public as that which the host site was authorised to address. There was no new public and therefore no CTTP on the part of the intermediary.
The Court goes on to point out that, if the host site had not been freely accessible and the links provided by the intermediary had circumvented restrictions on access, users of the link would have been treated as a new public since they were not the public which the host site was authorised to address.
The Court does not say so but it may be that one of the factors that led it to this conclusion is the principle underlying the doctrine of exhaustion of rights that a rights holder should not be entitled to additional remuneration once he has realised the full economic value of his content by putting it on the market. The Directive expressly stipulates that the exhaustion doctrine does not apply to the communication to the public right but that has not prevented suggestions that, in the digital arena, the underlying principle should apply. Certainly the Court has been innovative in its thinking about the CTTP.
The new boundaries
The consequences of the decision in Svensson remain to be explored. But some online activities appear now to be permitted without authorisation by rights owners, including online linking and framing services and deep linking in relation to any freely accessible website. That will come as a surprise and disappointment to some rights holders who might otherwise expect to control or at least earn income from the use of their material online.
But the emphatic nature of the decisions in TVCatchup and Svensson, short as they are and almost aggressively unsupported by opinions from the Advocates-General, suggests that the Court means exactly what it has said and will stick with it.
As the CTTP right gradually displaces the reproduction right as the means for rights holders to secure copyright revenues from use of their property on the internet, it is not just the boundaries of the CTTP right that are important – clarity of analysis is equally or more important to avoid doubt as to how it applies to new technologies and new business models as they emerge. The Court has built on the three-tier model of CTTP in the Berne Convention by applying it where it where the technical means of redistribution differ and by applying a “new public” test where they do not. Whether the “new public” test really works and, if it does, whether the Court has thereby achieved a proper balance between intermediaries and rights owners remains to be seen.
14 February 2014
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