What is it about copyright law that makes Governments of both left and right try to reform it without Parliamentary scrutiny?

A few years ago the Labour Government included a clause in what was to become the Digital Economy Act that would have conferred wide powers on Ministers to amend copyright law.  This was supposed to help deal with the vexed problem of online infringement.  It was a controversial proposal, to say the least, with comparisons being made with the powers wielded by Henry VIII and with the Legislative and Regulatory Reform Bill of 2006, described by one commentator as the Abolition of Parliament Bill.  The Government responded to the criticisms by proposing that a Minister’s amendments should be subject to a super-affirmative Parliamentary procedure as a safeguard but eventually the clause was dropped.

Now the Coalition Government has brought forward the Enterprise and Regulatory Reform Bill, clause 56 of which proposes to confer on Ministers unlimited power to add or remove exceptions to copyright.  On one view, this would give Ministers even wider powers.  On the face of it, however, the only safeguard is the lesser, ordinary affirmative procedure of resolutions by both Houses of Parliament. 

Copyright exceptions are, of course, a topic on which the Government has already made its post-Hargreaves policy plain – it thinks that the widest possible exceptions within the existing EU framework are likely to be beneficial to the UK. Rights owners will not unnaturally ask how far the Minister might go.  The answer in practice lies in the EU framework, that is to say the Information Society and Rental and Lending Directives, which circumscribe what the Minister can do.  In particular the Minister cannot lawfully go outside the permitted exceptions that are listed in the Directives.  The Minister must also comply with the Directives’ so-called three-step test, limiting the exceptions to special cases which do not conflict with a normal exploitation of the relevant work and do not unreasonably prejudice the legitimate interests of the rights holder.  Quite what that means in light of recent cases is, to say the least, obscure but it will be some sort of constraint at some level.

So for all that clause 56 looks like another Henry VIII clause with only limited safeguards, the EU framework is something of a protection against Ministerial over-exuberance.  But is this the best way to frame what is likely to be quite complex legislation?

Parliament’s only contribution to the reform of the copyright exceptions will be the ability to block a Ministerial order by declining to pass a resolution affirming it.  It cannot propose or require its own amendments.  The whole process of second reading Ministerial explanation and subsequent scrutiny and amendment at the committee, report and third reading stages in both Houses of Parliament is lost if it is all in the hands of the Minister.  It ceases in effect to be a Parliamentary matter.  The development of the legislation to give effect to the new policy will take place within a government department which, for all the no doubt valiant efforts of civil servants to consult, is vulnerable to lobbying and sectoral capture and to development behind closed doors.

The alternative is to include the proposed exceptions on the face of the Bill.  It is not clear why they should not form part of the Bill instead of being developed out of sight in a departmental back room.  There is room for more than one view as to the wisdom and appropriateness of removing the reform of this key feature of our copyright law from full Parliamentary scrutiny.

The second reading debate on the Bill is due to take place in the House of Commons on 11 June.

New but somewhat equivocal light has been cast on what “communication to the public” (“CTTP”) means in European copyright law by two judgments delivered by the Court of Justice on 15 March 2012 (Societa Consortile Fonografici (SCF) v Marco del Corso and Phonographic Performance (Ireland) Limited (PPIL) v Ireland). 

What CTTP means matters as online digital delivery increasingly replaces physical carriers, such as CDs and DVDs, as the means of distribution of music, films and other copyright content.  Rights owners, broadcasters, platform operators, users, device manufacturers, dentists (as to which see below) and lawyers (especially) need to know when, where and in what circumstances the making available of content requires authorisation by or payment to rights holders.  The Information Society Directive does not say what it means and the spate of recent decisions in the courts have enlarged its apparent scope in some surprising ways.  Gone is the comfortable assumption, for example, that CTTP is limited to transmissions on electronic networks – recent decisions of the Court of Justice have held that it includes showing films to customers in a pub and even (in one of the 15 March judgments) leaving CDs and players in a hotel room for the convenience of guests. 

Various aspects of the CTTP right remain to be clarified in outstanding references to the Court of Justice but as some holes are filled, others appear, as these two most recent cases show. 

They were both brought by collecting societies representing phonogram producers.  They sought to collect equitable remuneration for the playing of records in hotel rooms on the one hand and in a dentist’s surgery on the other on the basis that this amounted to a CTTP.  The decision was that the first was, and the second was not, a CTTP.  But the surprise in this case was that, far from following the SGAE v Rafael Hoteles case (where the distribution by a hotel of television signals to guest rooms was held to be a CTTP under the Information Society Directive and led to a string of cases including Airfield where provision of a satellite platform was held a CTTP), the Court held that CTTP under the Rental and Lending Directive had a different meaning.  It was a surprise because it had hitherto seemed that the Court had been seeking to establish what it called in the SGAE case an autonomous and uniform interpretation of the concept throughout the Community.  

In these two new cases, however, the Court started from the proposition that EU legislation must, so far as possible, be interpreted in a manner that is consistent with international law, in particular where the legislative provisions are intended specifically to give effect to an international agreement concluded by the EU.  In the case of these two Directives, each was intended to give effect to different international agreements and the Court took the view that the CTTP concept in each of them had to be interpreted in a way which was compatible with the particular international agreements to which the Directive was intended to give effect, taking account of their context and purpose.  That led it to adopt a different approach to the assessment of whether a CTTP had taken place under the Rental and Lending Directive from that which applied under the Information Society Directive. 

The details are less important than the fact that the interpretation of CTTP under the one Directive was held to be different from that under the other.  It means that cracks have appeared in what hitherto seemed to be a single, unitary concept of CTTP.  Its interpretation will depend on whichever Directive applies to the facts.  It also means that the answer to the question where a CTTP takes place, which has been referred to the Court of Justice in the Football Dataco v Sportradar and which is keenly awaited, may not necessarily apply to copyright at all since the issue has arisen not under the copyright Directives but under the Database Directive.  That would be a huge step backwards. 

So far as the details are concerned, the Court in the case of the dentist’s surgery approached  the question whether there was a CTTP in the surgery by taking account of a number of what it called complementary criteria, including the role of the user, the nature of the listening public and whether the communication was profit-making.  On the one hand this contrasts with the approach of the Court in the SGAE line of cases under the Information Society Directive, where the question turned on whether there was an intervention by which protected works were made accessible to a new public.  On the other hand, it is similar to the multi-factorial approach that Floyd J used in trying to apply that very question in ITV v TVCatchup to online retransmission of over the air broadcasts and which was the basis of his reference of the matter back to the Court of Justice. 

That reference back may be an opportunity for the Court of Justice, by adopting what was in the dentist’s case a multi-factorial approach similar to that taken by Floyd J, to align its decisions under the various Directives, to prevent the cracks from spreading and to restore something of a unitary interpretation of CTTP, a key concept in the new digital environment.        

In its response to the Hargreaves Review, the Government agreed with the Review’s central thesis.  It said that the widest possible exceptions to copyright within the existing EU framework were likely to be beneficial to the UK.  As work commences to see how far those exceptions can go within that framework, however, the courts have been finding that some of the existing exceptions already go too far.  Where they go beyond what is permitted, they are likely to be repealed.  Little attention has yet been paid to this upcoming retrograde motion.

It began with Floyd J in June last year (2011) when he delivered judgment in the TVCatchup case.  That was (indeed still is at the time of writing) a case which in essence turns on whether the retransmission on the internet of live UK public service broadcast TV to online audiences within the UK infringes copyright in the broadcasts on the basis that the retransmission is a communication to a new public.  That key question remains to be answered with the help of the Court of Justice but in the meantime a number of things have been established by the June judgment – first that, if there is an infringement, the exception for the retransmission of wireless broadcasts in s.73 of the CDPA provides a limited defence and second, more materially for present purposes, the exception applies to digital which goes beyond the analogue uses that are permitted by the EU framework, specifically Article 5 of the Information Society Directive.  No amount of interpretative sophistry permitted by the principle established in Marleasing could rescue it.  The exception goes beyond the boundaries set by the Directive.

It means that, for the time being, digital retransmissions on the internet and other cable-based systems of the main broadcast channels enjoy an exception from copyright.  But if the BBC, ITV or other PSBs thereby suffer loss, they will no doubt be considering making Francovich damages claims against the Government for failure to transpose the Directive into national law.  The Government in turn will no doubt be considering its powers under the European Communities Act to repeal s.73 rather promptly and thereby limit its liability.

Then in February this year (2012) Kitchin LJ descended from the Court of Appeal to finish off the FAPL v QC Leisure case that has had broadcasting lawyers on their toes for years now.  The Court of Justice having replied to a number of questions that he had referred to it, he decided a number of issues left over from the trial in 2008.  One of them concerned the showing of Premier League matches on television in a pub.  If that was an infringement of the copyright in any film included in the broadcast, was it within the exception for the free public showing of broadcasts in s.72 of the CDPA?  Again, the exception went beyond the boundaries set by Article 5 of the Information Society Directive and did so in so clear a way that there was no scope for interpreting it down on the Marleasing basis. 

It means that, again for the time being, pubs will have a small shield against some of the copyright claims to which they are now exposed by showing programmes on television in pubs (thanks to other parts of the FAPL case).  And if that means that the rights owners will suffer loss, the Government will again know where they are likely to turn.  It does not therefore seem likely that the s.72 exception will survive any longer than the s.73 exception, at least in its present form.

The withdrawal of these exceptions will be a salutary reminder to those exploring ways of enlarging the present list of UK exceptions that the EU framework has teeth.  It is part of a trend as European law increasingly (in our day to day work) sets the scene in broadcasting copyright and regulation.

One of the key features of the AVMS Directive is to require the UK and other Member States to regulate TV-like programme services on the internet, including on-demand.  Quite what that means and what services are in scope is not entirely clear from the Directive.  Some people must have hoped that transposition into UK law of the requirements of the Directive would throw light on the uncertainties but if so they will have been disappointed. At least so far as on-demand services are concerned, the AVMS Directive has been transposed warts and all. 

In due course, the uncertainties are likely to be resolved by the courts.  In the meantime, however, Ofcom has begun to build up what looks like its own case law in relation to on-demand services by deciding a series of “appeals” from ATVOD, its designated on-demand co-regulator.  Ofcom has decided, in relation to the video portion of a newspaper’s website, how to approach the identification of a service (The Sun).  It has rejected the ingenious proposition that adult material is not comparable to the form and content of programmes normally included in TV programme services and therefore outside the scope of the new rules (Playboy TV).  And most recently (18 January 2012) it has decided that the person who is to be treated as having editorial responsibility and therefore as the provider of the service may depend on the contracts that have been entered into between the supplier and distributor of the material (certain Viacom channels on Virgin Media).

But is it case law?  Are these decisions the result of a judicial procedure?  It seems not.  Ofcom has powers to adjudicate complaints with respect to fairness and privacy, inherited from the old Broadcasting Standards Commission, but has none in relation on-demand services.  The procedure by which it decides these appeals may have been modelled on the procedure for the adjudication of complaints but, in the absence of statutory authority, it is surely a regulatory and not a judicial procedure.  It is a means by which Ofcom reaches its own decisions as concurrent regulator and is an opportunity for it, by explaining its reasoning, to give guidance to the industry and ATVOD.

One feature of the procedure that Ofcom has adopted in these appeals is a non-disclosure rule.  The parties to an appeal may make public the fact that an appeal has been made but must not disclose any material submitted in relation to it or take any steps which could compromise a fair decision or otherwise constitute an abuse of process.  In other words, in contrast to other regulatory decisions in relation to which open debate of the issues through the consultation process is encouraged, Ofcom makes its decisions in these appeals on the meaning and effect of the AVMS Directive behind closed doors and anyone involved must observe a strict silence.  

And yet, at the same time, some of the decisions are to be made through the consultation process.  One of the issues in the appeal by The Sun was whether the material on its website was TV-like.  Instead of deciding it in the context of the appeal, which turned out not to be essential, Ofcom accepted ATVOD’s submission that it would be more appropriate for any further guidance on comparability with TV to be the product of consultation involving Ofcom, ATVOD  and “relevant stakeholders”. 

So there appear to be two pathways which Ofcom can follow to help it and others decide what the relevant provisions of the AVMS Directive mean.  But one of them, the “appeal” procedure, appears to be designed to stifle public debate of the issues during what appears to be a lengthy appeal period (the appeal by The Sun took almost nine months). 

The procedures that Ofcom follows in these appeals are not yet set in concrete.  They derive from a draft in a consultation document published over a year ago and, in the absence of a final decision, have been applied in the form in which they appear in the draft.  So it may be that the non-disclosure rules will be adapted in the final version to reflect the regulatory, non-judicial nature of these “appeals” so as to encourage rather than stifle debate.  But in the meantime, it appears that those who wish to challenge a decision of ATVOD, instead of being able to participate in any public debate on the issues, must have to be more than circumspect about what they say while Ofcom makes up its mind.                         

Others have found other reasons to complain about clarity.  In a judgment handed down this week (on 14 November) in the TVCatchup litigation, in which the question arose as to whether an internet retransmission of a free to air broadcast was a communication to the public, Floyd J decided it was still not clear to what extent the creation of a new link from the broadcaster to the subscriber was to be equated with the creation of a new public and that the question should be referred back to the Court of Justice.

Those readers of this blog who wish to predict the Court of Justice’s answer to this particular question should look at paragraph 72 of the Airfield judgment but those who are looking for a more general understanding of this group of decisions by the Court should also look elsewhere.  The real clue lies in the Berne Convention.  Article 11bis of the Convention deals with the communication to the public right and the Court in both Rafael and FAPL referred to it.  The definition in that Article in effect divides the right up broadly into three types, the first of which is the original transmission, the second is a retransmission by another organisation and the third is communication by loudspeaker and the like. It is not difficult to see that Rafael and FAPL fall neatly into the second and third types respectively.  With such a venerable origin, these decisions are anything but eccentric or difficult.  This typology of communications is here to stay.
 
Copyright licensing can readily adjust to this new landscape in which the incidence of liability arises in an increasing number of points in the value chain - the ease of aggregation in digital platforms is likely to lead to a proliferation of targets for rightsholders and perhaps an unexpected additional overhead for operators. But where does it stop? If aggregators provide a new public, do not search engines also do so? What is the difference? Where does the boundary lie? These are more questions to be explored in the development of the communication to the public right, increasingly the organising principle of copyright in the digital domain.

Copyright owners reading the judgment of the Court of Justice in FAPL v QC Leisure and Murphy v Media Protection Services can be forgiven for being startled by the Court having held that copyright owners are entitled only to reasonable remuneration for their rights.  Does this foreshadow price regulation of royalties?
 
There are ample precedents.  Monopolistic service providers who charge “excessive” prices are liable for abuse of their dominant position.  Regulators have developed sophisticated models, such as long run average incremental cost in the telecoms sector, to relate prices to their economic cost where the service provider has significant market power (the equivalent of dominance in that sector).  Copyright exploitation having some features of monopoly provision, it is not inconceivable that these concepts might be applied to it.  Could this be its future?
 
What the Court in FAPL said was that the European copyright regime does not guarantee the right holders concerned the opportunity to demand the highest possible remuneration.  Instead they are ensured only “appropriate remuneration for each use of the protected subject matter … In order to be appropriate, such remuneration must be reasonable in relation to the economic value of the service provided.”  In support of this proposition it cites a number of case authorities.  Most of them show the Court being concerned that rights owners should be remunerated appropriately in the sense that they should not be paid too little, not too much.  One of them, however, Kanal 5 v STIM, supported the proposition that it would be abusive for a dominant copyright collecting society to impose a price which was excessive in relation to the economic value of the service provided.  That decision was not really on all fours with the pub football cases since the collecting society’s dominance arose from circumstances other than the monopoly features inherent in copyright itself. 
 
So the Court in FAPL was pushing at the boundaries here to some extent.  But the main prop for its initiative was the Information Society Directive, which is now the main source of copyright law in Europe, and in particular recital 10 which says: “If authors or performers are to continue their creative and artistic work, they have to receive an appropriate reward for the use of their work”.  We might be forgiven for having hitherto read this as meaning “not less than” an appropriate reward instead of the new reading by the Court which, in effect is “not more than” or, perhaps, to be fair, “neither more nor less than”.
 
Anyway,the Court held that, in calculating the appropriate remuneration for a satellite audience, it was legitimate to take into account not only the actual and potential audience (in all Member States), measured these days with a high degree of precision thanks to the use of encryption and decoder cards, but also a premium paid by the broadcaster for territorial exclusivity.  What was not legitimate was any further premium element attributable to what it called “absolute” territorial exclusivity, that is to say the prohibition on distributing decoder cards outside the broadcaster’s exclusive territory.  That prohibition, which plainly had the object of eliminating cross-border trade and partitioning the internal market, was incompatible with fundamental single market principles and anti-competitive.  That further premium, it held, went beyond what was necessary to ensure appropriate remuneration for the right holders.
 
So in the short term the lesson is that territorial exclusivity is not in itself a problem unless it is absolute and a premium is charged for it.  Exclusivity is absolute if it cuts off transborder services.  New licensing models for exclusive territorial rights without this absolute feature will no doubt be devised to respond to this, not only in satellite broadcasting but also on the internet where geoblocking is widespread.  But in the longer term, the concept of “appropriate” remuneration as a cap rather than a threshold for rights owners will be a cause of some concern.
 

A new dimension has been added to the vexed question of internet copyright clearances.
 
It had seemed that the internet was a domain in which the use of content would be regulated primarily by the (relatively) new communication to the public right, unlike traditional forms of exploitation such as book publishing and even film distribution which are regulated primarily by the reproduction right.  This development seemed entirely appropriate in the new world of networked distribution, even though some fundamental issues remain to be worked out, not least of which is the question where the act of communication takes place, which has been referred to the Court of Justice in Football Dataco v Sportradar.
 
Now, however, the courts appear to be striking out on their own with a new analysis of what happens from a copyright point of view when content is distributed on the internet.  They are treating the viewing of content by a user as involving acts of reproduction, on the basis that the display of copyright content on a computer monitor or other screen reproduces the whole or a substantial part of the content and is not protected by the temporary copying exception introduced by Article 5(1) of the Information Society Directive (s.28A of the CDPA).  If this initiative is upheld, it could mean among other things that internet distributors will need to clear content in every country of the world, whatever the decision of the CJEU in the Football Dataco case.
 
The new analysis was considered in 2008 in one of the pub football cases (FAPL v QC Leisure) when the judge at first instance took the view that single frames from a film that were reproduced in a television screen display did not amount to a substantial part of the film but referred to the CJEU the question whether the court should consider the sequence of frames collectively.  The CJEU has not yet answered the question but, in the meantime, it has decided in effect in Infopaq v Danske Dagblades that any extract containing an element of a work which, as such, expresses the author’s own intellectual creation could amount to reproduction within the meaning of the Directive. 
 
The Advocate General in FAPL has accordingly taken the view that individual frames form part of the intellectual creation represented by a transmitted broadcast and their display on a screen therefore constitutes reproduction within the meaning of the Directive.  An enigmatic reference to the possibility that the European fundamental freedoms and/or Directive 93/83 might establish a right to receive a broadcast suggests that she may have felt uncomfortable with this conclusion but she went on anyway to consider whether the viewer would have a defence under the temporary copying exception in Article 5(1).  As to this, she took the view that, whilst copying in the electronic buffers in the user’s receiving equipment had no independent economic significance and was therefore within the exception, the same was not true of transient copies of a work created on a television screen, which she thought had independent economic significance and was therefore outside the exception.  Whether the CJEU follows her reasoning remains to be seen.
 
Subject to anything that may emerge from the eventual decision of the CJEU in FAPL, the effect of Infopaq is therefore to lower the bar so far as the substantial part test is concerned and opens the way to fragments of content held in buffers or displayed on a computer monitor being treated as reproductions of a substantial part of a work from a copyright point of view and potentially as infringing acts unless they are licensed or have the benefit of the temporary copying exception.
 
Similar points arose in NLA v Meltwater, a decision of Proudman J in November 2010 which was upheld by the Court of Appeal in July this year.  It concerned the on-screen display of newspaper clippings.  There, citing the FAPL case, the judge reached a similar conclusion on the issue of reproduction and the application of the temporary copying exception but, so far as the exception was concerned, made her decision on the ground that it could not apply where the copying was not for a lawful use.  In her view the display of the clippings was not a lawful use.  With all due respect, her reasoning appears to leave something to be desired but it was upheld by the Court of Appeal.
 
If, then, everything from casual browsing of text to viewing a film on the internet is likely to involve the reproduction of a substantial part of the content accessed by the viewer without the benefit of the temporary copying exception, it appears to follow that, to avoid infringement, the right for the user to reproduce a work on reception must be cleared in every country in which those acts of reproduction take place - in addition to clearing the communication to the public right.  If that is right, it turns on its head the widespread practical assumption that it is sufficient for broadcasting and similar acts of electronic distribution to be cleared in the country from which the transmission emanates, and this will be so whatever the CJEU decides in the Football Dataco case.  In internet distribution of content that is accessed in visual form, the reproduction right will regain, if not its primary position, at least joint primary status with the communication to the public right.
 
Whether this makes sense from a policy point of view is something the courts will have to consider.  It is not obvious that the courts are the best forum but at present there appears to be little alternative unless the Hargreaves initiative leads to governments grappling with it.
 
The upshot is that, by operating a reception device, be it a television, PC, tablet, mobile or whatever, a viewer may routinely infringe the copyright in material transmitted to the device, unless either there is something in the suggestion about fundamental freedoms or the directive referred to above, which is a bit of a long shot, or it is licensed expressly or impliedly by the rightsholders.  In practice under current distribution arrangements, however, it is difficult to see what loss the rightsholders would suffer as licence fees can be assumed to cover the value of conventional viewing but this is not a sound basis for the future development of the digital media sector. 

Is the supply of digital content a supply of goods or of services?  Until recently, few would have had any difficulty in giving an unqualified answer to this question.  Recent developments, however, suggest that the position may be changing.

The distinction between goods and services underlies a good deal of current law and regulation.  In IP law, for example, the exhaustion of rights principle and the prohibition on parallel imports applies to goods but not to services.  In consumer law, the consumer’s rights differ according to whether the consumer is buying goods or services.

Exhaustion of rights

In IP law, the conventional perception of exhaustion is illustrated by recital 29 of the 2001 Directive on copyright in the information society:

“The question of exhaustion does not arise in the case of services and on-line services in particular. … Unlike CD-ROM or CD-I, where the intellectual property is incorporated in a material medium, namely an item of goods, every on-line service is in fact an act which should be subject to authorisation where the copyright or related right so provides.”

Ten years on, that perception has been challenged by the Advocate General in the current pub football cases, which concern the question whether exclusive territorial licensing of live transmissions of Premier League football matches are compatible with single market principles and are currently before the European Court of Justice.  In those cases (Murphy v Media Protection Services and FAPL V QC Leisure), the Advocate General has taken the opposite view of on-line services from that which appears in recital 29.  She says:

“… Admittedly, some services differ from goods in that they cannot be re-used per se, for example the services provided by hairdressers. With the payment for the provision of the service the economic value is realised, but the service cannot be passed on as such. In this sense, there is actually no scope for an ‘exhaustion’ of the right to the service. … Other services, by contrast, do not differ significantly from goods. Computer software, musical works, e-books, films etc. which are downloaded from the internet can easily be passed on in electronic form. This is also illustrated by the fact that additional digital rights management measures are needed to prevent them being passed on.”

She therefore argues that to limit the application of two of the fundamental freedoms of the single market, the free movement of goods and the freedom to provide services, by a strict delimitation of goods and services would be “arbitrary”. 

She goes on to argue that IP-based restrictions on the single market freedom to provide services, specifically the prohibition on using smart cards issued in one member state to watch the transmission in another member state, are not justifiable, notwithstanding that this means in effect that the rights in relation to that supply of services are thereby treated as exhausted.  In other words, if her analysis is upheld by the ECJ, parallel trading in the right to watch the transmission, a service, will be outlawed in much the same way as parallel imports are outlawed.

In other words, in the context of digital broadcasting, and by extension the provision of music, films and other content on the internet, digital content is to be treated in the same way as goods notwithstanding that it is supplied as part of a service.

Download to own

A similar trend is emerging in the unrelated field of consumer rights.  A draft Consumer Rights Directive has been proposed by the European Commission and is intended to replace a number of existing consumer protection directives.  The Commission’s draft provides in the conventional way that digital content stored on physical media, such as CDs and DVDs, is to be treated as goods whilst content downloaded from the internet is to be treated as the supply of a service.  The European Parliament’s recently published (January 2011) report has suggested otherwise, however, and has proposed a definition of “goods” that extends to any intangible item that is useable in a manner which can be equated with physical possession.  It explains what it means in a proposed new recital as follows:

“Digital content transmitted to the consumer in a digital format, where the consumer obtains the possibility of use on a permanent basis or in a way similar to the physical possession of a good, should be treated as goods for the application of the provisions of this Directive which apply to sales contracts. However, a withdrawal right should only apply until the moment the consumer chooses to download the digital content.”

In other words, download to own would be treated as a supply of goods for the purposes of consumer rights.  So, for example, consumer cancellation rights would be assimilated to the treatment of tangible digital goods such as a CD.  Just as those rights would be deemed to expire as soon as the CD was unsealed from its packaging, so in the case of downloaded digital content they would be deemed to expire if the download takes place with the consumer’s express consent.  Treating digital content as a “good” under the Directive would therefore avoid the problem of leaving consumers of downloaded digital content unprotected by many of the protections within the Directive which do not apply to the supply of services. 

Some of the consequences may be difficult to manage, such as a suggested right of cancellation.  The report acknowledges that a right of cancellation would pose some tricky practical problems, not least of which would be the question of how to prevent consumers who have exercised their right of cancellation from continuing to use the digital content, about which rights holders will have strong views.

What next?

Certainly, a general abandonment in relation to digital content of such a deeply embedded distinction as that between goods and services is likely to lead to a number of changes.  If the ECJ follows the Advocate General’s opinion in the pub football cases, a radical rethink of digital licensing practices in Europe will be urgently needed.  If the Council adopts the Parliament’s suggestion in the Consumer Rights Directive, consumer rights in online transactions for digital content will equally require a radical rethink.  And other consequences will no doubt follow in other areas as well.

By Tony Ballard and Nicolas Murfett

Addicts of overseas soap operas who live in the UK will be familiar with the difficulties in getting internet access to the latest episodes.  They may be available on a site in the country of origin, such as France or the US, but access is often blocked.  This is because the overseas website, when receiving a request for the episode from a UK computer, will look up the computer’s IP (Internet Protocol) address in publicly available tables and, finding it among the addresses allocated to an ISP located in or serving the UK, will decline the request.  The blocking can be circumvented via proxy sites or other technical measures but in general the underlying geolocation software limits access to users who are located in the appropriate territory or region. 

Use of geoblocking is widespread on the internet.  It is particularly useful in avoiding rights clearance issues.  Those issues readily arise because rights, unlike the internet with its global reach, are conferred and owned on a national, territorial basis.  Geoblocking allows distributors to match audiences to the territories for which they hold rights.  This is fine for those who administer the rights, but others would question whether this makes best use of the commercial opportunities presented by the internet (quite apart from principles of freedom of expression).  Others again would point out that, in vertical agreements for the distribution of goods, restricting the territory into which a buyer may sell, is in general a hardcore competition restriction and is outlawed.  In the ordinary course, however, limiting the territorial reach of an internet service is necessary since it is impractical to clear rights in every territory and anyway it is well established in European case law that services are treated differently from goods.

This may change.  In February 2011 in FAPL and others v QC Leisure and others the Advocate General issued an Opinion which, if followed by the ECJ, may make it unlawful in Europe without objective justification for rightsholders to impose or enforce geoblocking restrictions on the basis that they are incompatible with the freedom to provide services in the single market and are anti-competitive.  Further, in the following month in Football Dataco Ltd and others v Sportradar GmbH and another the High Court in London referred another question to the ECJ that could, depending on the answer, obviate the need for geoblocking altogether, at least so far as rights clearances in Europe are concerned.

The Football Dataco case concerns database rights but the principles involved are of general application.  In short, the point at issue is whether the making available of a protected work on the internet occurs in the member state from which it is transmitted, the member state in which it is received, or both.  The “making available” is, of course, part of the new generic communication to the public right that has subsumed and replaced the old broadcasting/inclusion in a cable programme service right in the UK in 2003 and is designed to cover internet use of a work.  The question, then, is this:  When a work is communicated to the public on the internet without the rightsholder’s consent, does the infringement occur in the emitting state, the receiving state or both?  If it is the emitting state alone, reception in other states would not infringe, no local clearance would be needed in those other states and geoblocking would not be needed, at least not to avoid infringing.

There is an obvious analogy with satellite transmissions, which, like the internet, do not respect national boundaries and for which special provision was made in Europe in 1993 by the Satellite and Cable Directive. Its definition of a “communication to the public by satellite” is to the effect that it is the act of introducing, under the broadcaster’s control, the programme-carrying signals for reception by the public into an uninterrupted chain of communication to the satellite and down to the earth.  In other words, the act restricted by copyright is the initiation of the transmission and it takes place in the emitting state alone.  But the analogy is not necessarily helpful – it could mean either that the court should follow it, on the basis that it makes sense from a policy point of view, or that it should not, on the basis that satellite transmissions are plainly a special case and that the underlying law points in a different direction without which there would have been no need for a Directive.

If the emitting state approach were adopted generally (and not limited to Europe) in relation to the internet so that the act of communication took place only in the place where the relevant servers were located, it is not difficult to see the mischief that would occur if server provision could be outsourced to a country which applied different rules or none.  But this is an unlikely outcome since the case is concerned only with the position within Europe itself.  But until the question is decided, nobody knows where the act of communication to the public takes place when a work is made available on the internet. 

And until the ECJ delivers itself of its decision in the FAPL case, nobody knows whether clauses requiring geoblocking in licence agreements with rightsholders are vulnerable to challenge under competition law, nor can the debate begin as to whether the clauses might be objectively justified by the nature and effect of the communication to the public right.

In the meantime, rightsholders and service providers are left with serious uncertainties for which contractual provision has to be made in many cases.  And whatever the outcome of the cases before the ECJ, it is unlikely that it will improve access to US soaps, at least in the short term since they are outside the EU, although it is likely to improve access to Plus Belle la Vie, a French soap aired Monday to Friday on France 3 since 2004, currently indisponible according to the France 3 website when accessed from the computer on which this blog was written.